AI transcript
Hi everyone, welcome to the A6NC podcast.
Today’s episode features Mark Andreessen interviewing Bobby Kotick,
CEO of Fortune 500 company Activision Blizzard, the largest game network in the world,
responsible for popular entertainment franchises such as Call of Duty, Candy Crush and World of
Warcraft. The discussion originally took place at our most recent annual innovation summit
and covers everything from the evolution of games in the 80s to the mergers and acquisitions that
created the company he runs today to trends in gaming, including touching on esports.
You can also find other podcasts and videos from this event at asixnz.com/summit.
Please note that the content here is for informational purposes only, should not be taken as legal
business tax or investment advice, or be used to evaluate any investment or security.
For more details, please also see asixnz.com/disclosures.
So, Bobby, it is really fun as a long-time video game aficionado. Really fun to have the chance
to talk to you today. I would love to start with your origin story, as they say in the superhero
business. So, part of your origin story, if I recall correctly, is that you started writing
software for the Apple II while you were still in college. So, my college roommate and I started
a company. He worked at Apple Computer in France. He was French and his summer internship,
he was working for a guy called Jean-Louis Gasset, and they had a prototype of the Lisa,
and the Lisa was the Mac before the Mac. It was the $10,000 version of the Mac.
So, he saw this prototype of the Lisa and thought for $10,000 this would be too expensive to turn
into a consumer product. So, he came back from his internship and said, “We should make Lisa-like
software and a mouse for the Apple II.” And we were in another sort of technology-related
business in our dorm room at the time, but we thought we were making hardware. I thought this
would be a better business, is make software. And we really thought if Steve Jobs is going to
appropriate all the great technology from Xerox Palo Alto Research Center, we should do the same,
but do it on a broader scale. So, we designed this mouse and a word processor and a spreadsheet
and a database all for the Apple II with a graphical user interface about a year before
the Macintosh was released. You also, I believe, credit, if I’m correct, Steve Jobs with convincing
you to drop out of college? I don’t know if it’s credit, but Steve Jobs heard about us.
Because when you started, you were in college. I was in college. I was making Apple II software,
and he heard about the software, and he called me and said, you know, the lady said, “Steve Jobs
calling.” I was like, “Okay, it’s one of the kids I grew up with from Rosalind Long Island, and this
is not even that good a joke.” Steve is like super famous, like Cover Time magazine. Yeah, this is
like 1983, late 1983. ’83, ’83, ’83. Right. Super famous. Yeah, and I’m like, “Yeah, right, whatever.”
So, I pick up the phone, he’s like, “Hi.” I said, “Hi.” He said, “This is Steve Jobs.” I said,
“Yeah.” Sure. And all I’m thinking is like, I wanted to say like, “I’m Oscar Robertson.” I was
a big Knicks fan. I thought like, so he starts like telling me, “You need to come to Cupertino,
and I really want to talk to you about this Jane thing that you made.” And so I go, and he shows
his prototype of the Macintosh, and like, I’ll never forget this moment. He unzips this little blue
bag from off of his table, and he takes it out, and he turns it on, and you see the hell out come
up on the screen, and I thought, “Wow, this is unbelievable. This is going to change computing.”
And I like, I still get the goosebumps of just thinking about it. And then he said, “Okay, now
show me yours.” And so like, I’ve had lugged this Apple II with like the 64K floppy drive,
and this mouse that we designed, and we put it on, and I show him the mouse, and he looks at it,
he’s like, “This is a piece of shit.” And he throws it on the floor, and he says, “You’re going to use
our mouse, and don’t ever think of using a two-button mouse. You’re going to use a one-button
mouse.” And then I show it to him, and the first thing he says is, “Wait a second. You select the
text, and then you select boldface?” I’m like, “Yeah.” He’s like, “No. We’re going to think about
verb noun versus noun verb in the way you actually boldface type.” And for 45 minutes, we had this
huge debate about how you boldface type. And at the end of it, he’s like, “You’re going to make
this for a new computer that we’re going to build called the Apple II GS, and we’re going to tell
you all about it, but you’re going to make this software for the Apple II. And we’re going to
give you a contract.” He goes, “This is a contract.” And then he comes to visit us in Ann Arbor,
Michigan, in our office above a Burger King. And the first thing he says is, “How the hell do you
work here? The smell of burgers comes up the elevator.” He’s like, “It was cheap rent. Nobody
else wanted to rent on top of a Burger King.” So at the end of the meeting, he says, “Do you have
any vegetarian restaurants here that we could go to for dinner?” And I said, “Yeah, I’m sure we do,
but I can’t go to dinner. I have a class.” He’s, “What do you mean?” I said, “I have a class.” He
said, “In what?” I said, “It’s a history of art makeup class.” He said, “What are you making up for?”
I said, “Well, I didn’t go to the class.” He’s like, “Well, why do you need to go to this?” I said,
“Well, I’m in college.” And he looks at me. He’s like, “What are you talking about? You have a
contract with Apple Computer, and we have a deadline for the Apple II GS. You can’t be in
college. You have employees. You have to work full-time.” He’s like, “Get out of college.”
And I said, “I can. I promise my parents I would finish college.” He said,
“No, you’re not finishing college. I will rip,” and I can’t say the word,
“I will rip this f-ing contract up right now if you don’t quit college.” So I quit the next day.
Did your parents believe the story? I didn’t tell them for about eight months. I felt like,
all right, I needed to get more progress in the business before my father would say,
“You’re an idiot. Now, you took money from this gambling guy and you quit college. You’re just a
loser.” So then fast forward a few years. So 1990, you bought 25% stake in Activision,
became CEO in 1991. So Activision, people may not know, Activision was a storied brand in video
games. Activision, I believe this is correct, was the first third-party developer of video games
in 1980. So it was a spin-off from Atari. It was for the top people at Atari. They got in
conflict with management. And this is a very big deal, number one, just because, you know, to quit
starting a company is a big deal. But also it’s just a big deal because like literally there had
not been a business of making video games for somebody else’s platform. Atari made all the
games for Atari. And now at this company, Activision, they had a run of hits, I guess in the 80s,
early 80s, you know, they made a bunch of the top games for Atari systems. And then they went
bankrupt or they were about to go bankrupt. They had a decade of pathetic performance and then
finally went bankrupt. Okay, got it. So as long as a whimper, not a bang. And so how did you get
from building mice in your above the Burger King to buying Activision? So in 1987, there were no
real video game hardware companies. And I played a lot of video games as a kid and I loved Activision
games. So they made the original Atari 2600 games that made the company so successful. Games like
Pitfall and River 8 and Kaboom. And these are just great games. And so in 1987, I thought there’s a
great opportunity to make video game hardware. And nobody is making video game hardware games are
just played on personal computers. Nintendo was just coming to the US. So there was no
dedicated video game hardware. My best friend from growing up had just started a hedge fund
with this guy from Texas named Richard Rainwater. And they were looking for investments.
And I went to him and I said, I have this idea. And in 1987, in October, the market had crashed.
It was like a 500 point market crash was Black Monday. Black Monday was one of the
biggest crashes in the market history since the Great Depression. And I had been working
making software for, among other companies, Apple and Commodore. And Commodore was this
$900 million revenues company at the time with $150 million market value. And so I went to
my best friend and I said, we should buy Commodore. They have this computer called the Amiga.
And it has a keyboard and a disk drive, but we should pull the keyboard and the disk drive out of
it. And it would be the first 16 bit video game system. And it was designed by Exitari engineers
and was made basically as a video game. It was a big leap forward graphics performance at the time.
68,000 microprocessor and dedicated graphics processors. And it was like a really innovative
idea. And my best friend at the time said, yeah, let’s try and do this. And so we tried. And
ultimately couldn’t persuade the chairman of Commodore to do the deal. But I just became then
fixated with being in the video game business. And my best friend at the time was Eddie Lampert,
who then went on instead of buying Commodore to buy Sears and Kmart. And he was a customer for a
little while. We stopped extending credit to him. I think four years ago, though. So I thought, okay,
we have to be in the video game business. And I had a little side business that was a licensing
company. We licensed characters. So one of our licensing partners was Nintendo. And we were
licensing Nintendo characters for bedsheets and lunchboxes. And I knew the Nintendo people. And
one day I was having a Nintendo meeting. And they said, have you ever thought about
Activision? And I said, yeah, I know the company well, I played all the games. And they said,
they’re not in really good shape. And they’re about to lose a patent infringement judgment that
will probably make them bankrupt. So you should consider buying Activision. So I bought a 25%
stake in Activision for $440,000. And I became the largest shareholder.
And it was insolvent. But I tried to get the CEO on the phone to tell him I was his new largest
shareholder. It’s a public company. It’s a public company with a market cap of $1.6 million. Yeah,
$1.6 million. And a patent infringement judgment that made it insolvent. And so I couldn’t… Here’s
this company that’s doing horribly, has all these great franchises. And the CEO wouldn’t return my
phone call. And so I kept calling, kept calling. And finally I just thought, I’ll just go to the lobby
of the building and tell him I’m there and see if he’ll see me. So I go and I’m waiting in the lobby.
And finally after three hours, he says, okay, I’ll come talk to you. And I talked to him and I
said, you know, we’re your largest shareholder. I have some really great ideas for you. I have
some game ideas I’d like to make. And, you know, I love some of the old properties. Maybe we can
figure out how to really get some of those properties back to being games. And he’s like,
well, thank you very much for visiting and nice to meet you. And I said, no, no, I’m like, when is
the next meeting? And he said, there’s not a next meeting, but we’re very happy to have you as
shareholders. And so I thought, well, how does that work? I own 25% of the company. I’m the
largest shareholder. We’re really a quarter of the furniture in the lobby. And he didn’t return my
phone calls for a little while. And then he agreed to have breakfast with me at this consumer
electronic show in Las Vegas. Obviously, Activision was then, you know, tremendously successful.
You then did one other really, really big deal that was transformative for the company, which was
and I don’t quite know how to describe it, but I think it’s a merger with Vivendi games
that resulted in Activision Blizzard, because Vivendi owned Blizzard, Blizzard, obviously,
World of Warcraft and all these other amazing properties. And then ultimately that partnership
on one, maybe you could tell us like that was a very, very big deal for you at the time.
How did that deal come about? So it was the spring of 2008. And I had a lot of anxiety about the
public markets and financial crisis is brewing. Yeah. And you could see there was a lot of
volatility instability. We were nervous, but we thought, you know, if we could buy something,
we had a big market value at the time. And I thought if we could buy something great,
that we really love, this would be a good time to do it. And you guys weren’t yet doing the massive
multiplayer. You guys weren’t yet doing like there was this big World of Warcraft had been a big hit
at that point. Huge hit. And we had explored doing a massively multiplayer persistent game.
There were a couple of other games before World of Warcraft that were massively multiplayer games,
but nothing that had had the success of WoW. And we looked and said, if we even could figure out
how to do it, it would take us five, six, seven years and a billion dollars. And the likelihood is
we wouldn’t do a good job of it. But it was a, and I knew the Blizzard team because we had worked
with them on, they were a contract development company in the early 1990s. And I knew the team
very well and really liked them. And I tried to recruit them out of the company. And I knew that
they had so much of a love and a passion for the company that no matter who owned it, they probably
wouldn’t leave. And I called the guys at Blizzard a bunch of times and said, we should truly try and
work this out. And they were stuck as a division of Vivendi Games, which was owned by Vivendi.
And you might describe what Vivendi was at this point. It was a big mess. And it was a former,
if I think it’s correct, it was a former public utility. Well, it was the water company of France
that this very, and by water and other things that flow through pipes. Yeah, water, other things that
flow through pipes. It was a collection of more industrial businesses that the, a man had taken
it over and decided he was going to become the media mogul of earth and bought universal studios.
And anything he could actually buy, he just bought. And then it got disassembled because
it was insolvent. And they ended up with a couple of businesses. The best one for them at the time
was probably Universal Music, which I think Lucine is here somewhere. So they had Universal Music.
They owned Morocco Telecom, Upstake. They owned SFR, which is a French mobile company.
They own Kennel Police. And somehow they managed as a part of a bunch of things to own
this games business, which included Blizzard. And I asked them to sell us Blizzard. And we didn’t
have any interest in the rest of their games business, but we wanted Blizzard. And they said,
no, repeatedly. And we offered them $4 billion and then $5 billion and then $6 billion and then $7
billion. They kept saying, no, they like video games. So we came up with this idea and we said,
how about this? We’ll stay a public company. You sell us Blizzard or give us Blizzard and $2
billion of cash, and we’ll give you 51% of the company. And my view was in 2008, even the biggest
institutional investors no longer were really long-term holders. And all the big institutional
investors were trading in and out of the stocks like they were hedge funds. So if we could get
Vivendi to own 51% of our company, we got Blizzard as a partner, we would have a great business and
a stable shareholder who would never sell our stock and would be enthusiastic about investing,
at least what they told us, investing with us for the future. So we went back and forth for a
long time, finally negotiated a deal where they would do that deal. And I almost blew the deal
in the worst way too. They had this beautiful headquarters in France, like the nicest building
in France. And the guy who had put the original Vivendi together, there were lots of these
beautiful French offices that had gardens on the top of their roof. He built a park
and like mature trees on the top of the Vivendi building. It was like a park with trees that
were all over the place. And one room was like a wine cellar and one room was this magnificent
dining room. And so we’re standing on the top of this roof overlooking the Arc de Triomphe
and the Eiffel Tower. And the chairman of the Vivendi says to me, “Bobby, this building,
it will be your home. This will be your place. You can do your business in France and you should
treat this building like your home. You can do anything you want with this building, but it will
be your place for Paris. You can make a business here. And it’s the most beautiful building in
Paris. It’s the most beautiful view in Paris and it’s for you. You can do anything you want with
it.” And I said, “Anything? You can do anything.” And I said, “Can I build 20 stories of condominiums?”
And he turned white and I could see the like, “Oh my God, who are we getting in business with love?”
I was going to say, “He hadn’t been briefed.” And I said, “No, no, Jean-Marie, I’m just kidding.
We would only build 10 stories.” But he still went through with the deal. And so we had five
wonderful years with them as our 51% shareholder until they were forced to sell our stake. But it
was the thing that actually allowed us to acquire a business. So it’s a big deal. I mean, it’s really
uncharacteristic for a company like this with a founder really of the modern business and then a
CEO like you to be willing to sign over control. So that story to me makes a lot of sense if you’d
said 49%. What was it about that deal that made you willing to literally sign up? Because it
worked out well with that. Was it a pretty big risk at the time or not? I didn’t really think I
was selling control. I think I was selling 51%, but I thought they really know nothing about video
games. What are they going to do? And I don’t think they’re going to interfere all that much. I was
actually wrong. They didn’t really have, you know, it’s like a corporate holding company. So they
were always trying to justify their value as a corporate holding company. And you know, we had
like, I remember the, and Lucien who’s here will attest to this is exactly what happened. But
they said we’re having a synergy meeting and all the business unit heads need to come together
for the synergy meeting. Now they own a stake in Morocco telecom. We didn’t do business in Morocco.
They own SFR, the French telephone company and mobile games wasn’t really a thing at that time.
They own Canal Plus. So a French TV network didn’t really have any applicability and
universal music where we did license some music for Guitar Hero, but other than that we had no
relationship and a broadband company in Brazil. So we all get together and have this big synergy
meeting. And then we had to go around the room and say the synergies that we identified between
each other. And they got to me and I said that Morocco telecom, we went to their cafeteria
and they have tagine. And we got the tagine recipe for our cafeteria,
which I thought was a great synergy because I like tagine, but there wasn’t really that much
synergy. So then they had to sell us back their stake. And then it was completely unwinding,
ultimately. And I guess they completely unwound in their own way. And everybody did well.
So it turned out. So give us a kind of a state of the video games industry today,
gigantic global phenomenon, lots and lots of change and flux, lots of potential controversy.
So I would say of the 28 years I’ve been doing Activision, 30-some-odd years I’ve been doing
software, I’ve never seen more opportunities than exist today. Markets that are opening. And you
think just 10 years ago, if you wanted to play video games, you either needed $1,000 PC or $300
or $400 video game console. And there really weren’t any other ways to play video games. But
phones have ushered in this whole new opportunity. And like for years, for most of the tenure that
I’ve had as CEO, we sold in developed countries to middle-class consumers on expensive devices.
Today, we sell in 196 countries around the world. We have 400 million customers.
And anyone in any socioeconomic strat can actually play games. I think that was the biggest shift
that took place is now you truly have a global market. The second thing that then happened is
when you started to see the games become more social experiences. I can use a headset. I can
talk to the person I’m playing with. I can play with somebody from anywhere around the world.
The introduction of the social experience was the true transformation to me of the opportunity.
And so where you look out in the world today, you have a global audience. You have this ability
to create this true social experience. And I remember years ago hearing this, and I’ll paraphrase,
but Mandela had this definition of sport, that it was the great equalizer. And it was this thing
that allowed you to actually break racial barriers and religious barriers and economic barriers in
order to foster competition and that the great competitors in sport could come from anywhere.
And everybody felt this ability to have a sense of belonging and purpose and meaning. And that
is what video games has become for so many people. And it’s hard to illustrate this for some people,
but I was at a panel not long ago with Alex Rodriguez, who actually owns one of our Overwatch
team franchises, and Roger Goodell, who is the NFL commissioner. And the moderator said, “Are eSports
sports?” And I said, “The same characteristics that Mandela described, what makes sport great
is what makes eSports so compelling and engaging.” And I said, “To Alex, stand up.”
And Alex stood up and I said, “Look at you. How many people in the world can play professional
baseball?” And he said, “Well, there are roughly 1,200 professional baseball players in the
Major League Baseball and about 3,000 capable of playing Major League Baseball.” And I said,
“Look at this guy. Like this is like the most fit athletic specimen of a human on the earth.
And there are only 3,000 of those people who can do what he does. Video games is the only
competitive medium that is going to give me that experience and that purpose and that sense of
belonging and that camaraderie that you get from sport.” And so, of course, it’s going to be
as popular as sport, if not more popular than sport. And that, I think, more than anything, is now
what we see as driving consumption and engagement and interest and passion. And we’re just scratching
the surface of opportunity. So I think people have obviously had a lot of great experiences
and a great faith in the video game industry for many years, based on the idea that everybody
can participate. This idea that people are going to voluntarily watch other people playing video
games is a new idea. And obviously it’s becoming a twitch and one of our companies and so forth.
Like this is going to be a very big phenomenon. It’s a key part of eSports is the ability to
fill an arena with people watching other people play video games. Like a few years ago,
that just sounded wildly implausible. What was the point? Like, when did you figure that out?
Well, I think probably when we launched. I didn’t own Blizzard at the time, but when Starcraft
launched, this was a game that in Korea, I think at the height of its popularity. Rob’s here,
so he’ll know the exact number. But I think, you know, this is more than a decade ago, but the
height of its popularity in Korea, Starcraft had 5 million registered players. Now this is a country
of 60 million people. The game is primarily a male game experience. And so you think about 20% of
the population actually of the male population played, or was a registered player of Starcraft.
And we saw arenas getting filled with spectators. There were three dedicated cable channels in
South Korea that just broadcast Starcraft competition. There were sponsors. There were
professional players making $100,000 or more. So this is an amazing phenomena that took place that
we looked at as purely marketing. You know, the people are enthusiastic. We saw the box. There was
nothing more to it than that. And we managed to do every single thing wrong in commercializing the
eSport of Starcraft. But it was the first time where I really thought, you know, there’s something
that could even be bigger than the games themselves that would relate to the spectator experience.
Now, even with games like Overwatch, which is probably our most successful eSport initiative,
it’s more like golf. So if you’re a spectator of Overwatch, it’s likely you’re a player of
Overwatch. Fortnite, I think, was the first game where people would spectate and it would actually
be a catalyst for them to play. And so I think what’s happened is it’s more of a social experience
in a lot of respects than it is just a game. But I think that what you’re now starting to see is
that games have so infiltrated the popular culture of the world that it’s exciting for people to watch
their heroes who compete against each other in the same way as sport.
Right. So many of the most successful games that people watch or that are now actually
formerly eSports, correct me if I’m wrong, they were not originally designed for this
period. They were designed to be games that people just played and they’ve been kind of repurposed
into this kind of broader public phenomenon. Maybe that’s to play untrue, but I guess my question
is kind of how will video games be designed going forward for eSports and for people watching it in
addition to playing that is different than how video games have been designed up to this point?
Yeah, that’s a great question. So a lot of the games today were not specifically designed for
spectating, which is why you end up with that phenomenon of the players are the spectators.
In order to have a more broad appeal spectator experience, the games need to be designed in a
way that you actually want to watch them, whether you do or don’t play them. And I would say that
the Overwatch team spent a lot of time early on trying to construct a game from the ground up
that would be a fun spectator experience. But I think what you will see is that people are now
paying more attention to in game design, the idea that the games may be spectated by people who
aren’t players. I don’t think anytime soon that’s going to be the primary consideration. We’ll still
be principally focused on gameplay, but things like camera angles and commentating and making sure
like when we organized the Overwatch League, one of the organizing principles was the reason why
sports are so successful is tribalism and that having a local affiliation was so crucial to the
success of sport, whether it’s a country affiliation or city affiliation. So we created a structure
that allowed for 28 independent cities to field teams. And I think that as you start to take those
considerations into play when you’re thinking about the design of the games or the leagues or the
competitive experience, that they will have more of the characteristics of traditional sport.
Right. Would you venture a guess as to when video games will be in the Olympics?
Which is a logical implication of what we’re discussing, right?
I don’t think so. I actually don’t think like the Olympics has never been about
a commercial enterprise. And so if you think of the analog, right, there’s not like if you had to
pick a game, you’re now endorsing someone’s commercial enterprise. You know, there’s not any,
there’s they don’t have that analog today. And so I don’t know that you could see the logical
jump to the Olympics. Okay. The video game industry seems to have a particularly cute version of a
dynamic that you see with, you know, let’s just say consumer properties that inspire an avid fandom.
So it’s the enthusiastic early adopters, right? And so you see this with movies,
you see this with TV shows, you see this with basically things that really occupy the popular
imagination. You know, for sure see it with video games. So you’ve got this kind of leading edge,
you might say early adopters slash super enthusiastic user base, and they start to develop
opinions and they start to develop opinions that maybe the people who make the games are quite
doing what they want. And then when things, you know, really go sideways, there can be, you know,
protestant boycoss and all kinds of like, you can end up with the inmates running the asylum or at
least looking like they’re certainly trying to, how do you throw the needle as somebody who make
an overseas letters? How do you how do you throw the needle for the early adopter base as opposed to
the mainstream? And how much is the early adopter base an asset? How much is the early adopter base
a challenge, a problem? So I think that the difference between film or television, you know,
a great film, you’re going to spend two hours of your life watching. You know, great TV shows,
it’s going to be 13 episodes or 22 episodes a season. You know, it’s going to be 13 or 22 hours.
Video game, our average duration of gameplay that includes games like Candy Crush is an hour per
person per day. Games like Call of Duty or World of Warcraft are hours a day. So the interest in
the engagement and the commitment that you’re making to that form of media is so different
than film and television. In my view, you have the right to have a strong opinion and voice your
opinion in exchange for making that hour plus commitment a day, which becomes more of a lifestyle.
And so instead, you know, I think some companies run and hide and don’t really engage their user
base. But I think we have users and players who will and audience members who will tell you
and give you really good insight into how you can modify and adapt your game. So you listen to
them and they’re not always right. But oftentimes they’re pretty and especially when you hear the
sort of the mass view, they’re pretty right. The beauty of our business though is that if you
can get out in front of it early, let people actually have an experience with the game,
get the feedback and you’re willing to take that feedback and enhance and improve and modify the
games. It’s a great roadmap for innovation. So I’d like to ask you about two games that I think
are arguably transformative from a conceptual standpoint for gaming. And you tell me what
you think or maybe describe what you think are the structural significance of each of these.
And so the first is Fortnite. And you alluded to one of the dramatic changes. So maybe describe
like what is the significance of Fortnite to the industry? So for starters, there’s this perception
that Fortnite is an overnight success. It’s not epic. The company that made it has been in the
video game. Tim has been in the game business almost as long as I have been. And they are excellent
at making games. And what they did was to really spend the time in a very focused, determined way
taking the Unreal Engine and turning it to something that was going to be a broad appeal,
very compelling social experience. And I think the aspiration was build the social network that’s
anchored in a game conceit. And they made it cross-platform in its playability. They made it
very accessible. They changed the way that they deliver content to season. So moved from the
feature film model to the serialized television model. And it’s really fun. And they managed to
do what you probably can’t do intentionally, but capture the popular cultural zeitgeist.
And the other thing is that it doesn’t require you to make a two hour a day investment. You know,
you can have a 20 minute experience that is really satisfying. But this is not accidental. You know,
these guys have been doing this for a very long time. And I think what it has started to do is
broaden the appeal of games to people who might never have played games before.
And then what is the significance of Pokemon Go? And by the way, for people who don’t actually
just saw this yesterday, Pokemon Go, third party report. But the report was revenue last month was
still in the order of $75 million. So it’s still something like a billion dollar a year revenue
business today. And this is where the game is now what, two years old or something like that.
Almost three years.
At least rumor has it that they have new stuff coming. But it’s been a giant hit.
Again, it’s like, where’s the innovation there? But it’s like, you know,
Nintendo is really great at innovations that are very physical in their nature. So the Wii,
that moment I was describing to you about the Macintosh, when I first saw the prototype of the
Wii, it was like that equivalent goose bump moment. I was in Kyoto and I went into his room
and there was a TV and it wasn’t like an LED. It was an actual tube TV. And there was a pond that
was on the screen, like a little cartoon pond with little bubbles popping up from every once in a
while. And the head of Nintendo at the time was a guy named Iwata-san. And he gave me the controller.
And I held the controller and I just started going like this. And all of a sudden you could feel
the tension of the controller and the motion control of the controller. And I started to like
fish around and I grabbed the fish and I pulled the fish out. And I thought that video games
will be completely transformed. Nothing had really taken the physical experience in video games to
that level. And I think that what Pokemon Go did is something very similar. But it created this
physical experience that I think it was the first time AR had been executed on a broad scale.
And so I haven’t seen anything in gaming that I would tell you has really captured the imagination
of people on a broad scale using AR besides Pokemon Go. But I would say when you look at
where some of the next big innovations in gaming, including what we’re working on,
AR is going to have more near-term impact than VR. Amazing. Okay, good. And then final closing
question. What’s the one Activision game that has come out this year that people really have to
play? And then I know it may pain you, but I’m going to ask you, what’s the best non-activision game
that has come out this year that people really have to play? So I would say Call of Duty Blackhouse
4, which we just released, the blackout mode of Call of Duty Blackhouse 4 is so incredibly fun to
play. And what is that? What is that mode? It’s like a PUBG mode. It’s like a battle royale mode.
And it’s super fun to play. And you can do it in like small 25 minute increments, but very accessible,
very fun to play. I haven’t played Red Dead Redemption yet, but I want to. And I would say of the things
that have come out this year, I think it looks like Westerns are very hard to do because they’re
very American in their field. But the game looks fantastic. And everybody they know has played
it. Is that a lot of fun playing it? Yeah, fantastic. And I think we have party favorites. We brought
Call of Duty for everybody. Call of Duty. So I believe everybody’s going to have a copy of Call of
Duty. Bobby, thank you so much. Mark, thank you very much.
Today’s episode features Mark Andreessen interviewing Bobby Kotick,
CEO of Fortune 500 company Activision Blizzard, the largest game network in the world,
responsible for popular entertainment franchises such as Call of Duty, Candy Crush and World of
Warcraft. The discussion originally took place at our most recent annual innovation summit
and covers everything from the evolution of games in the 80s to the mergers and acquisitions that
created the company he runs today to trends in gaming, including touching on esports.
You can also find other podcasts and videos from this event at asixnz.com/summit.
Please note that the content here is for informational purposes only, should not be taken as legal
business tax or investment advice, or be used to evaluate any investment or security.
For more details, please also see asixnz.com/disclosures.
So, Bobby, it is really fun as a long-time video game aficionado. Really fun to have the chance
to talk to you today. I would love to start with your origin story, as they say in the superhero
business. So, part of your origin story, if I recall correctly, is that you started writing
software for the Apple II while you were still in college. So, my college roommate and I started
a company. He worked at Apple Computer in France. He was French and his summer internship,
he was working for a guy called Jean-Louis Gasset, and they had a prototype of the Lisa,
and the Lisa was the Mac before the Mac. It was the $10,000 version of the Mac.
So, he saw this prototype of the Lisa and thought for $10,000 this would be too expensive to turn
into a consumer product. So, he came back from his internship and said, “We should make Lisa-like
software and a mouse for the Apple II.” And we were in another sort of technology-related
business in our dorm room at the time, but we thought we were making hardware. I thought this
would be a better business, is make software. And we really thought if Steve Jobs is going to
appropriate all the great technology from Xerox Palo Alto Research Center, we should do the same,
but do it on a broader scale. So, we designed this mouse and a word processor and a spreadsheet
and a database all for the Apple II with a graphical user interface about a year before
the Macintosh was released. You also, I believe, credit, if I’m correct, Steve Jobs with convincing
you to drop out of college? I don’t know if it’s credit, but Steve Jobs heard about us.
Because when you started, you were in college. I was in college. I was making Apple II software,
and he heard about the software, and he called me and said, you know, the lady said, “Steve Jobs
calling.” I was like, “Okay, it’s one of the kids I grew up with from Rosalind Long Island, and this
is not even that good a joke.” Steve is like super famous, like Cover Time magazine. Yeah, this is
like 1983, late 1983. ’83, ’83, ’83. Right. Super famous. Yeah, and I’m like, “Yeah, right, whatever.”
So, I pick up the phone, he’s like, “Hi.” I said, “Hi.” He said, “This is Steve Jobs.” I said,
“Yeah.” Sure. And all I’m thinking is like, I wanted to say like, “I’m Oscar Robertson.” I was
a big Knicks fan. I thought like, so he starts like telling me, “You need to come to Cupertino,
and I really want to talk to you about this Jane thing that you made.” And so I go, and he shows
his prototype of the Macintosh, and like, I’ll never forget this moment. He unzips this little blue
bag from off of his table, and he takes it out, and he turns it on, and you see the hell out come
up on the screen, and I thought, “Wow, this is unbelievable. This is going to change computing.”
And I like, I still get the goosebumps of just thinking about it. And then he said, “Okay, now
show me yours.” And so like, I’ve had lugged this Apple II with like the 64K floppy drive,
and this mouse that we designed, and we put it on, and I show him the mouse, and he looks at it,
he’s like, “This is a piece of shit.” And he throws it on the floor, and he says, “You’re going to use
our mouse, and don’t ever think of using a two-button mouse. You’re going to use a one-button
mouse.” And then I show it to him, and the first thing he says is, “Wait a second. You select the
text, and then you select boldface?” I’m like, “Yeah.” He’s like, “No. We’re going to think about
verb noun versus noun verb in the way you actually boldface type.” And for 45 minutes, we had this
huge debate about how you boldface type. And at the end of it, he’s like, “You’re going to make
this for a new computer that we’re going to build called the Apple II GS, and we’re going to tell
you all about it, but you’re going to make this software for the Apple II. And we’re going to
give you a contract.” He goes, “This is a contract.” And then he comes to visit us in Ann Arbor,
Michigan, in our office above a Burger King. And the first thing he says is, “How the hell do you
work here? The smell of burgers comes up the elevator.” He’s like, “It was cheap rent. Nobody
else wanted to rent on top of a Burger King.” So at the end of the meeting, he says, “Do you have
any vegetarian restaurants here that we could go to for dinner?” And I said, “Yeah, I’m sure we do,
but I can’t go to dinner. I have a class.” He’s, “What do you mean?” I said, “I have a class.” He
said, “In what?” I said, “It’s a history of art makeup class.” He said, “What are you making up for?”
I said, “Well, I didn’t go to the class.” He’s like, “Well, why do you need to go to this?” I said,
“Well, I’m in college.” And he looks at me. He’s like, “What are you talking about? You have a
contract with Apple Computer, and we have a deadline for the Apple II GS. You can’t be in
college. You have employees. You have to work full-time.” He’s like, “Get out of college.”
And I said, “I can. I promise my parents I would finish college.” He said,
“No, you’re not finishing college. I will rip,” and I can’t say the word,
“I will rip this f-ing contract up right now if you don’t quit college.” So I quit the next day.
Did your parents believe the story? I didn’t tell them for about eight months. I felt like,
all right, I needed to get more progress in the business before my father would say,
“You’re an idiot. Now, you took money from this gambling guy and you quit college. You’re just a
loser.” So then fast forward a few years. So 1990, you bought 25% stake in Activision,
became CEO in 1991. So Activision, people may not know, Activision was a storied brand in video
games. Activision, I believe this is correct, was the first third-party developer of video games
in 1980. So it was a spin-off from Atari. It was for the top people at Atari. They got in
conflict with management. And this is a very big deal, number one, just because, you know, to quit
starting a company is a big deal. But also it’s just a big deal because like literally there had
not been a business of making video games for somebody else’s platform. Atari made all the
games for Atari. And now at this company, Activision, they had a run of hits, I guess in the 80s,
early 80s, you know, they made a bunch of the top games for Atari systems. And then they went
bankrupt or they were about to go bankrupt. They had a decade of pathetic performance and then
finally went bankrupt. Okay, got it. So as long as a whimper, not a bang. And so how did you get
from building mice in your above the Burger King to buying Activision? So in 1987, there were no
real video game hardware companies. And I played a lot of video games as a kid and I loved Activision
games. So they made the original Atari 2600 games that made the company so successful. Games like
Pitfall and River 8 and Kaboom. And these are just great games. And so in 1987, I thought there’s a
great opportunity to make video game hardware. And nobody is making video game hardware games are
just played on personal computers. Nintendo was just coming to the US. So there was no
dedicated video game hardware. My best friend from growing up had just started a hedge fund
with this guy from Texas named Richard Rainwater. And they were looking for investments.
And I went to him and I said, I have this idea. And in 1987, in October, the market had crashed.
It was like a 500 point market crash was Black Monday. Black Monday was one of the
biggest crashes in the market history since the Great Depression. And I had been working
making software for, among other companies, Apple and Commodore. And Commodore was this
$900 million revenues company at the time with $150 million market value. And so I went to
my best friend and I said, we should buy Commodore. They have this computer called the Amiga.
And it has a keyboard and a disk drive, but we should pull the keyboard and the disk drive out of
it. And it would be the first 16 bit video game system. And it was designed by Exitari engineers
and was made basically as a video game. It was a big leap forward graphics performance at the time.
68,000 microprocessor and dedicated graphics processors. And it was like a really innovative
idea. And my best friend at the time said, yeah, let’s try and do this. And so we tried. And
ultimately couldn’t persuade the chairman of Commodore to do the deal. But I just became then
fixated with being in the video game business. And my best friend at the time was Eddie Lampert,
who then went on instead of buying Commodore to buy Sears and Kmart. And he was a customer for a
little while. We stopped extending credit to him. I think four years ago, though. So I thought, okay,
we have to be in the video game business. And I had a little side business that was a licensing
company. We licensed characters. So one of our licensing partners was Nintendo. And we were
licensing Nintendo characters for bedsheets and lunchboxes. And I knew the Nintendo people. And
one day I was having a Nintendo meeting. And they said, have you ever thought about
Activision? And I said, yeah, I know the company well, I played all the games. And they said,
they’re not in really good shape. And they’re about to lose a patent infringement judgment that
will probably make them bankrupt. So you should consider buying Activision. So I bought a 25%
stake in Activision for $440,000. And I became the largest shareholder.
And it was insolvent. But I tried to get the CEO on the phone to tell him I was his new largest
shareholder. It’s a public company. It’s a public company with a market cap of $1.6 million. Yeah,
$1.6 million. And a patent infringement judgment that made it insolvent. And so I couldn’t… Here’s
this company that’s doing horribly, has all these great franchises. And the CEO wouldn’t return my
phone call. And so I kept calling, kept calling. And finally I just thought, I’ll just go to the lobby
of the building and tell him I’m there and see if he’ll see me. So I go and I’m waiting in the lobby.
And finally after three hours, he says, okay, I’ll come talk to you. And I talked to him and I
said, you know, we’re your largest shareholder. I have some really great ideas for you. I have
some game ideas I’d like to make. And, you know, I love some of the old properties. Maybe we can
figure out how to really get some of those properties back to being games. And he’s like,
well, thank you very much for visiting and nice to meet you. And I said, no, no, I’m like, when is
the next meeting? And he said, there’s not a next meeting, but we’re very happy to have you as
shareholders. And so I thought, well, how does that work? I own 25% of the company. I’m the
largest shareholder. We’re really a quarter of the furniture in the lobby. And he didn’t return my
phone calls for a little while. And then he agreed to have breakfast with me at this consumer
electronic show in Las Vegas. Obviously, Activision was then, you know, tremendously successful.
You then did one other really, really big deal that was transformative for the company, which was
and I don’t quite know how to describe it, but I think it’s a merger with Vivendi games
that resulted in Activision Blizzard, because Vivendi owned Blizzard, Blizzard, obviously,
World of Warcraft and all these other amazing properties. And then ultimately that partnership
on one, maybe you could tell us like that was a very, very big deal for you at the time.
How did that deal come about? So it was the spring of 2008. And I had a lot of anxiety about the
public markets and financial crisis is brewing. Yeah. And you could see there was a lot of
volatility instability. We were nervous, but we thought, you know, if we could buy something,
we had a big market value at the time. And I thought if we could buy something great,
that we really love, this would be a good time to do it. And you guys weren’t yet doing the massive
multiplayer. You guys weren’t yet doing like there was this big World of Warcraft had been a big hit
at that point. Huge hit. And we had explored doing a massively multiplayer persistent game.
There were a couple of other games before World of Warcraft that were massively multiplayer games,
but nothing that had had the success of WoW. And we looked and said, if we even could figure out
how to do it, it would take us five, six, seven years and a billion dollars. And the likelihood is
we wouldn’t do a good job of it. But it was a, and I knew the Blizzard team because we had worked
with them on, they were a contract development company in the early 1990s. And I knew the team
very well and really liked them. And I tried to recruit them out of the company. And I knew that
they had so much of a love and a passion for the company that no matter who owned it, they probably
wouldn’t leave. And I called the guys at Blizzard a bunch of times and said, we should truly try and
work this out. And they were stuck as a division of Vivendi Games, which was owned by Vivendi.
And you might describe what Vivendi was at this point. It was a big mess. And it was a former,
if I think it’s correct, it was a former public utility. Well, it was the water company of France
that this very, and by water and other things that flow through pipes. Yeah, water, other things that
flow through pipes. It was a collection of more industrial businesses that the, a man had taken
it over and decided he was going to become the media mogul of earth and bought universal studios.
And anything he could actually buy, he just bought. And then it got disassembled because
it was insolvent. And they ended up with a couple of businesses. The best one for them at the time
was probably Universal Music, which I think Lucine is here somewhere. So they had Universal Music.
They owned Morocco Telecom, Upstake. They owned SFR, which is a French mobile company.
They own Kennel Police. And somehow they managed as a part of a bunch of things to own
this games business, which included Blizzard. And I asked them to sell us Blizzard. And we didn’t
have any interest in the rest of their games business, but we wanted Blizzard. And they said,
no, repeatedly. And we offered them $4 billion and then $5 billion and then $6 billion and then $7
billion. They kept saying, no, they like video games. So we came up with this idea and we said,
how about this? We’ll stay a public company. You sell us Blizzard or give us Blizzard and $2
billion of cash, and we’ll give you 51% of the company. And my view was in 2008, even the biggest
institutional investors no longer were really long-term holders. And all the big institutional
investors were trading in and out of the stocks like they were hedge funds. So if we could get
Vivendi to own 51% of our company, we got Blizzard as a partner, we would have a great business and
a stable shareholder who would never sell our stock and would be enthusiastic about investing,
at least what they told us, investing with us for the future. So we went back and forth for a
long time, finally negotiated a deal where they would do that deal. And I almost blew the deal
in the worst way too. They had this beautiful headquarters in France, like the nicest building
in France. And the guy who had put the original Vivendi together, there were lots of these
beautiful French offices that had gardens on the top of their roof. He built a park
and like mature trees on the top of the Vivendi building. It was like a park with trees that
were all over the place. And one room was like a wine cellar and one room was this magnificent
dining room. And so we’re standing on the top of this roof overlooking the Arc de Triomphe
and the Eiffel Tower. And the chairman of the Vivendi says to me, “Bobby, this building,
it will be your home. This will be your place. You can do your business in France and you should
treat this building like your home. You can do anything you want with this building, but it will
be your place for Paris. You can make a business here. And it’s the most beautiful building in
Paris. It’s the most beautiful view in Paris and it’s for you. You can do anything you want with
it.” And I said, “Anything? You can do anything.” And I said, “Can I build 20 stories of condominiums?”
And he turned white and I could see the like, “Oh my God, who are we getting in business with love?”
I was going to say, “He hadn’t been briefed.” And I said, “No, no, Jean-Marie, I’m just kidding.
We would only build 10 stories.” But he still went through with the deal. And so we had five
wonderful years with them as our 51% shareholder until they were forced to sell our stake. But it
was the thing that actually allowed us to acquire a business. So it’s a big deal. I mean, it’s really
uncharacteristic for a company like this with a founder really of the modern business and then a
CEO like you to be willing to sign over control. So that story to me makes a lot of sense if you’d
said 49%. What was it about that deal that made you willing to literally sign up? Because it
worked out well with that. Was it a pretty big risk at the time or not? I didn’t really think I
was selling control. I think I was selling 51%, but I thought they really know nothing about video
games. What are they going to do? And I don’t think they’re going to interfere all that much. I was
actually wrong. They didn’t really have, you know, it’s like a corporate holding company. So they
were always trying to justify their value as a corporate holding company. And you know, we had
like, I remember the, and Lucien who’s here will attest to this is exactly what happened. But
they said we’re having a synergy meeting and all the business unit heads need to come together
for the synergy meeting. Now they own a stake in Morocco telecom. We didn’t do business in Morocco.
They own SFR, the French telephone company and mobile games wasn’t really a thing at that time.
They own Canal Plus. So a French TV network didn’t really have any applicability and
universal music where we did license some music for Guitar Hero, but other than that we had no
relationship and a broadband company in Brazil. So we all get together and have this big synergy
meeting. And then we had to go around the room and say the synergies that we identified between
each other. And they got to me and I said that Morocco telecom, we went to their cafeteria
and they have tagine. And we got the tagine recipe for our cafeteria,
which I thought was a great synergy because I like tagine, but there wasn’t really that much
synergy. So then they had to sell us back their stake. And then it was completely unwinding,
ultimately. And I guess they completely unwound in their own way. And everybody did well.
So it turned out. So give us a kind of a state of the video games industry today,
gigantic global phenomenon, lots and lots of change and flux, lots of potential controversy.
So I would say of the 28 years I’ve been doing Activision, 30-some-odd years I’ve been doing
software, I’ve never seen more opportunities than exist today. Markets that are opening. And you
think just 10 years ago, if you wanted to play video games, you either needed $1,000 PC or $300
or $400 video game console. And there really weren’t any other ways to play video games. But
phones have ushered in this whole new opportunity. And like for years, for most of the tenure that
I’ve had as CEO, we sold in developed countries to middle-class consumers on expensive devices.
Today, we sell in 196 countries around the world. We have 400 million customers.
And anyone in any socioeconomic strat can actually play games. I think that was the biggest shift
that took place is now you truly have a global market. The second thing that then happened is
when you started to see the games become more social experiences. I can use a headset. I can
talk to the person I’m playing with. I can play with somebody from anywhere around the world.
The introduction of the social experience was the true transformation to me of the opportunity.
And so where you look out in the world today, you have a global audience. You have this ability
to create this true social experience. And I remember years ago hearing this, and I’ll paraphrase,
but Mandela had this definition of sport, that it was the great equalizer. And it was this thing
that allowed you to actually break racial barriers and religious barriers and economic barriers in
order to foster competition and that the great competitors in sport could come from anywhere.
And everybody felt this ability to have a sense of belonging and purpose and meaning. And that
is what video games has become for so many people. And it’s hard to illustrate this for some people,
but I was at a panel not long ago with Alex Rodriguez, who actually owns one of our Overwatch
team franchises, and Roger Goodell, who is the NFL commissioner. And the moderator said, “Are eSports
sports?” And I said, “The same characteristics that Mandela described, what makes sport great
is what makes eSports so compelling and engaging.” And I said, “To Alex, stand up.”
And Alex stood up and I said, “Look at you. How many people in the world can play professional
baseball?” And he said, “Well, there are roughly 1,200 professional baseball players in the
Major League Baseball and about 3,000 capable of playing Major League Baseball.” And I said,
“Look at this guy. Like this is like the most fit athletic specimen of a human on the earth.
And there are only 3,000 of those people who can do what he does. Video games is the only
competitive medium that is going to give me that experience and that purpose and that sense of
belonging and that camaraderie that you get from sport.” And so, of course, it’s going to be
as popular as sport, if not more popular than sport. And that, I think, more than anything, is now
what we see as driving consumption and engagement and interest and passion. And we’re just scratching
the surface of opportunity. So I think people have obviously had a lot of great experiences
and a great faith in the video game industry for many years, based on the idea that everybody
can participate. This idea that people are going to voluntarily watch other people playing video
games is a new idea. And obviously it’s becoming a twitch and one of our companies and so forth.
Like this is going to be a very big phenomenon. It’s a key part of eSports is the ability to
fill an arena with people watching other people play video games. Like a few years ago,
that just sounded wildly implausible. What was the point? Like, when did you figure that out?
Well, I think probably when we launched. I didn’t own Blizzard at the time, but when Starcraft
launched, this was a game that in Korea, I think at the height of its popularity. Rob’s here,
so he’ll know the exact number. But I think, you know, this is more than a decade ago, but the
height of its popularity in Korea, Starcraft had 5 million registered players. Now this is a country
of 60 million people. The game is primarily a male game experience. And so you think about 20% of
the population actually of the male population played, or was a registered player of Starcraft.
And we saw arenas getting filled with spectators. There were three dedicated cable channels in
South Korea that just broadcast Starcraft competition. There were sponsors. There were
professional players making $100,000 or more. So this is an amazing phenomena that took place that
we looked at as purely marketing. You know, the people are enthusiastic. We saw the box. There was
nothing more to it than that. And we managed to do every single thing wrong in commercializing the
eSport of Starcraft. But it was the first time where I really thought, you know, there’s something
that could even be bigger than the games themselves that would relate to the spectator experience.
Now, even with games like Overwatch, which is probably our most successful eSport initiative,
it’s more like golf. So if you’re a spectator of Overwatch, it’s likely you’re a player of
Overwatch. Fortnite, I think, was the first game where people would spectate and it would actually
be a catalyst for them to play. And so I think what’s happened is it’s more of a social experience
in a lot of respects than it is just a game. But I think that what you’re now starting to see is
that games have so infiltrated the popular culture of the world that it’s exciting for people to watch
their heroes who compete against each other in the same way as sport.
Right. So many of the most successful games that people watch or that are now actually
formerly eSports, correct me if I’m wrong, they were not originally designed for this
period. They were designed to be games that people just played and they’ve been kind of repurposed
into this kind of broader public phenomenon. Maybe that’s to play untrue, but I guess my question
is kind of how will video games be designed going forward for eSports and for people watching it in
addition to playing that is different than how video games have been designed up to this point?
Yeah, that’s a great question. So a lot of the games today were not specifically designed for
spectating, which is why you end up with that phenomenon of the players are the spectators.
In order to have a more broad appeal spectator experience, the games need to be designed in a
way that you actually want to watch them, whether you do or don’t play them. And I would say that
the Overwatch team spent a lot of time early on trying to construct a game from the ground up
that would be a fun spectator experience. But I think what you will see is that people are now
paying more attention to in game design, the idea that the games may be spectated by people who
aren’t players. I don’t think anytime soon that’s going to be the primary consideration. We’ll still
be principally focused on gameplay, but things like camera angles and commentating and making sure
like when we organized the Overwatch League, one of the organizing principles was the reason why
sports are so successful is tribalism and that having a local affiliation was so crucial to the
success of sport, whether it’s a country affiliation or city affiliation. So we created a structure
that allowed for 28 independent cities to field teams. And I think that as you start to take those
considerations into play when you’re thinking about the design of the games or the leagues or the
competitive experience, that they will have more of the characteristics of traditional sport.
Right. Would you venture a guess as to when video games will be in the Olympics?
Which is a logical implication of what we’re discussing, right?
I don’t think so. I actually don’t think like the Olympics has never been about
a commercial enterprise. And so if you think of the analog, right, there’s not like if you had to
pick a game, you’re now endorsing someone’s commercial enterprise. You know, there’s not any,
there’s they don’t have that analog today. And so I don’t know that you could see the logical
jump to the Olympics. Okay. The video game industry seems to have a particularly cute version of a
dynamic that you see with, you know, let’s just say consumer properties that inspire an avid fandom.
So it’s the enthusiastic early adopters, right? And so you see this with movies,
you see this with TV shows, you see this with basically things that really occupy the popular
imagination. You know, for sure see it with video games. So you’ve got this kind of leading edge,
you might say early adopters slash super enthusiastic user base, and they start to develop
opinions and they start to develop opinions that maybe the people who make the games are quite
doing what they want. And then when things, you know, really go sideways, there can be, you know,
protestant boycoss and all kinds of like, you can end up with the inmates running the asylum or at
least looking like they’re certainly trying to, how do you throw the needle as somebody who make
an overseas letters? How do you how do you throw the needle for the early adopter base as opposed to
the mainstream? And how much is the early adopter base an asset? How much is the early adopter base
a challenge, a problem? So I think that the difference between film or television, you know,
a great film, you’re going to spend two hours of your life watching. You know, great TV shows,
it’s going to be 13 episodes or 22 episodes a season. You know, it’s going to be 13 or 22 hours.
Video game, our average duration of gameplay that includes games like Candy Crush is an hour per
person per day. Games like Call of Duty or World of Warcraft are hours a day. So the interest in
the engagement and the commitment that you’re making to that form of media is so different
than film and television. In my view, you have the right to have a strong opinion and voice your
opinion in exchange for making that hour plus commitment a day, which becomes more of a lifestyle.
And so instead, you know, I think some companies run and hide and don’t really engage their user
base. But I think we have users and players who will and audience members who will tell you
and give you really good insight into how you can modify and adapt your game. So you listen to
them and they’re not always right. But oftentimes they’re pretty and especially when you hear the
sort of the mass view, they’re pretty right. The beauty of our business though is that if you
can get out in front of it early, let people actually have an experience with the game,
get the feedback and you’re willing to take that feedback and enhance and improve and modify the
games. It’s a great roadmap for innovation. So I’d like to ask you about two games that I think
are arguably transformative from a conceptual standpoint for gaming. And you tell me what
you think or maybe describe what you think are the structural significance of each of these.
And so the first is Fortnite. And you alluded to one of the dramatic changes. So maybe describe
like what is the significance of Fortnite to the industry? So for starters, there’s this perception
that Fortnite is an overnight success. It’s not epic. The company that made it has been in the
video game. Tim has been in the game business almost as long as I have been. And they are excellent
at making games. And what they did was to really spend the time in a very focused, determined way
taking the Unreal Engine and turning it to something that was going to be a broad appeal,
very compelling social experience. And I think the aspiration was build the social network that’s
anchored in a game conceit. And they made it cross-platform in its playability. They made it
very accessible. They changed the way that they deliver content to season. So moved from the
feature film model to the serialized television model. And it’s really fun. And they managed to
do what you probably can’t do intentionally, but capture the popular cultural zeitgeist.
And the other thing is that it doesn’t require you to make a two hour a day investment. You know,
you can have a 20 minute experience that is really satisfying. But this is not accidental. You know,
these guys have been doing this for a very long time. And I think what it has started to do is
broaden the appeal of games to people who might never have played games before.
And then what is the significance of Pokemon Go? And by the way, for people who don’t actually
just saw this yesterday, Pokemon Go, third party report. But the report was revenue last month was
still in the order of $75 million. So it’s still something like a billion dollar a year revenue
business today. And this is where the game is now what, two years old or something like that.
Almost three years.
At least rumor has it that they have new stuff coming. But it’s been a giant hit.
Again, it’s like, where’s the innovation there? But it’s like, you know,
Nintendo is really great at innovations that are very physical in their nature. So the Wii,
that moment I was describing to you about the Macintosh, when I first saw the prototype of the
Wii, it was like that equivalent goose bump moment. I was in Kyoto and I went into his room
and there was a TV and it wasn’t like an LED. It was an actual tube TV. And there was a pond that
was on the screen, like a little cartoon pond with little bubbles popping up from every once in a
while. And the head of Nintendo at the time was a guy named Iwata-san. And he gave me the controller.
And I held the controller and I just started going like this. And all of a sudden you could feel
the tension of the controller and the motion control of the controller. And I started to like
fish around and I grabbed the fish and I pulled the fish out. And I thought that video games
will be completely transformed. Nothing had really taken the physical experience in video games to
that level. And I think that what Pokemon Go did is something very similar. But it created this
physical experience that I think it was the first time AR had been executed on a broad scale.
And so I haven’t seen anything in gaming that I would tell you has really captured the imagination
of people on a broad scale using AR besides Pokemon Go. But I would say when you look at
where some of the next big innovations in gaming, including what we’re working on,
AR is going to have more near-term impact than VR. Amazing. Okay, good. And then final closing
question. What’s the one Activision game that has come out this year that people really have to
play? And then I know it may pain you, but I’m going to ask you, what’s the best non-activision game
that has come out this year that people really have to play? So I would say Call of Duty Blackhouse
4, which we just released, the blackout mode of Call of Duty Blackhouse 4 is so incredibly fun to
play. And what is that? What is that mode? It’s like a PUBG mode. It’s like a battle royale mode.
And it’s super fun to play. And you can do it in like small 25 minute increments, but very accessible,
very fun to play. I haven’t played Red Dead Redemption yet, but I want to. And I would say of the things
that have come out this year, I think it looks like Westerns are very hard to do because they’re
very American in their field. But the game looks fantastic. And everybody they know has played
it. Is that a lot of fun playing it? Yeah, fantastic. And I think we have party favorites. We brought
Call of Duty for everybody. Call of Duty. So I believe everybody’s going to have a copy of Call of
Duty. Bobby, thank you so much. Mark, thank you very much.
Bobby Kotick is the CEO of Activision Blizzard (a merger he engineered); it’s one of only two video gaming companies in the Fortune 500, and the largest game network in the world. The company is responsible for some of the most iconic entertainment franchises, including Call of Duty, Candy Crush, Overwatch, and World of Warcraft — as well as its own professional esports league.
So in this episode of the a16z Podcast, Marc Andreessen interviews Kotick on everything from the evolution of video games in the 1980s to gaming trends more broadly. What changes as gaming goes from ”just for nerds” to ”just for kids” and spreads more broadly into entertainment and cultural phenomena (esports, Fortnite, Pokemon Go, etc.)… both online and offline?
The conversation originally took place at our annual innovation a16z Summit in November 2018 — which features a16z speakers and invited experts from various organizations discussing innovation at companies small and large. You can also see other podcasts and videos from this event here: https://a16z.com/tag/summit-2018/
