a16z Podcast: Gaming Goes Mainstream

0:00:04 Hi everyone, welcome to the A6NC podcast.
0:00:07 Today’s episode features Mark Andreessen interviewing Bobby Kotick,
0:00:12 CEO of Fortune 500 company Activision Blizzard, the largest game network in the world,
0:00:17 responsible for popular entertainment franchises such as Call of Duty, Candy Crush and World of
0:00:23 Warcraft. The discussion originally took place at our most recent annual innovation summit
0:00:28 and covers everything from the evolution of games in the 80s to the mergers and acquisitions that
0:00:33 created the company he runs today to trends in gaming, including touching on esports.
0:00:40 You can also find other podcasts and videos from this event at asixnz.com/summit.
0:00:45 Please note that the content here is for informational purposes only, should not be taken as legal
0:00:51 business tax or investment advice, or be used to evaluate any investment or security.
0:00:55 For more details, please also see asixnz.com/disclosures.
0:00:59 So, Bobby, it is really fun as a long-time video game aficionado. Really fun to have the chance
0:01:05 to talk to you today. I would love to start with your origin story, as they say in the superhero
0:01:09 business. So, part of your origin story, if I recall correctly, is that you started writing
0:01:14 software for the Apple II while you were still in college. So, my college roommate and I started
0:01:19 a company. He worked at Apple Computer in France. He was French and his summer internship,
0:01:25 he was working for a guy called Jean-Louis Gasset, and they had a prototype of the Lisa,
0:01:30 and the Lisa was the Mac before the Mac. It was the $10,000 version of the Mac.
0:01:38 So, he saw this prototype of the Lisa and thought for $10,000 this would be too expensive to turn
0:01:44 into a consumer product. So, he came back from his internship and said, “We should make Lisa-like
0:01:50 software and a mouse for the Apple II.” And we were in another sort of technology-related
0:01:54 business in our dorm room at the time, but we thought we were making hardware. I thought this
0:01:59 would be a better business, is make software. And we really thought if Steve Jobs is going to
0:02:04 appropriate all the great technology from Xerox Palo Alto Research Center, we should do the same,
0:02:11 but do it on a broader scale. So, we designed this mouse and a word processor and a spreadsheet
0:02:17 and a database all for the Apple II with a graphical user interface about a year before
0:02:21 the Macintosh was released. You also, I believe, credit, if I’m correct, Steve Jobs with convincing
0:02:25 you to drop out of college? I don’t know if it’s credit, but Steve Jobs heard about us.
0:02:29 Because when you started, you were in college. I was in college. I was making Apple II software,
0:02:36 and he heard about the software, and he called me and said, you know, the lady said, “Steve Jobs
0:02:40 calling.” I was like, “Okay, it’s one of the kids I grew up with from Rosalind Long Island, and this
0:02:46 is not even that good a joke.” Steve is like super famous, like Cover Time magazine. Yeah, this is
0:02:54 like 1983, late 1983. ’83, ’83, ’83. Right. Super famous. Yeah, and I’m like, “Yeah, right, whatever.”
0:02:59 So, I pick up the phone, he’s like, “Hi.” I said, “Hi.” He said, “This is Steve Jobs.” I said,
0:03:03 “Yeah.” Sure. And all I’m thinking is like, I wanted to say like, “I’m Oscar Robertson.” I was
0:03:09 a big Knicks fan. I thought like, so he starts like telling me, “You need to come to Cupertino,
0:03:14 and I really want to talk to you about this Jane thing that you made.” And so I go, and he shows
0:03:20 his prototype of the Macintosh, and like, I’ll never forget this moment. He unzips this little blue
0:03:24 bag from off of his table, and he takes it out, and he turns it on, and you see the hell out come
0:03:28 up on the screen, and I thought, “Wow, this is unbelievable. This is going to change computing.”
0:03:33 And I like, I still get the goosebumps of just thinking about it. And then he said, “Okay, now
0:03:40 show me yours.” And so like, I’ve had lugged this Apple II with like the 64K floppy drive,
0:03:44 and this mouse that we designed, and we put it on, and I show him the mouse, and he looks at it,
0:03:51 he’s like, “This is a piece of shit.” And he throws it on the floor, and he says, “You’re going to use
0:03:54 our mouse, and don’t ever think of using a two-button mouse. You’re going to use a one-button
0:03:59 mouse.” And then I show it to him, and the first thing he says is, “Wait a second. You select the
0:04:03 text, and then you select boldface?” I’m like, “Yeah.” He’s like, “No. We’re going to think about
0:04:08 verb noun versus noun verb in the way you actually boldface type.” And for 45 minutes, we had this
0:04:13 huge debate about how you boldface type. And at the end of it, he’s like, “You’re going to make
0:04:17 this for a new computer that we’re going to build called the Apple II GS, and we’re going to tell
0:04:21 you all about it, but you’re going to make this software for the Apple II. And we’re going to
0:04:27 give you a contract.” He goes, “This is a contract.” And then he comes to visit us in Ann Arbor,
0:04:35 Michigan, in our office above a Burger King. And the first thing he says is, “How the hell do you
0:04:43 work here? The smell of burgers comes up the elevator.” He’s like, “It was cheap rent. Nobody
0:04:49 else wanted to rent on top of a Burger King.” So at the end of the meeting, he says, “Do you have
0:04:56 any vegetarian restaurants here that we could go to for dinner?” And I said, “Yeah, I’m sure we do,
0:05:01 but I can’t go to dinner. I have a class.” He’s, “What do you mean?” I said, “I have a class.” He
0:05:06 said, “In what?” I said, “It’s a history of art makeup class.” He said, “What are you making up for?”
0:05:11 I said, “Well, I didn’t go to the class.” He’s like, “Well, why do you need to go to this?” I said,
0:05:17 “Well, I’m in college.” And he looks at me. He’s like, “What are you talking about? You have a
0:05:21 contract with Apple Computer, and we have a deadline for the Apple II GS. You can’t be in
0:05:25 college. You have employees. You have to work full-time.” He’s like, “Get out of college.”
0:05:30 And I said, “I can. I promise my parents I would finish college.” He said,
0:05:36 “No, you’re not finishing college. I will rip,” and I can’t say the word,
0:05:41 “I will rip this f-ing contract up right now if you don’t quit college.” So I quit the next day.
0:05:47 Did your parents believe the story? I didn’t tell them for about eight months. I felt like,
0:05:51 all right, I needed to get more progress in the business before my father would say,
0:05:56 “You’re an idiot. Now, you took money from this gambling guy and you quit college. You’re just a
0:06:04 loser.” So then fast forward a few years. So 1990, you bought 25% stake in Activision,
0:06:09 became CEO in 1991. So Activision, people may not know, Activision was a storied brand in video
0:06:13 games. Activision, I believe this is correct, was the first third-party developer of video games
0:06:19 in 1980. So it was a spin-off from Atari. It was for the top people at Atari. They got in
0:06:22 conflict with management. And this is a very big deal, number one, just because, you know, to quit
0:06:25 starting a company is a big deal. But also it’s just a big deal because like literally there had
0:06:29 not been a business of making video games for somebody else’s platform. Atari made all the
0:06:33 games for Atari. And now at this company, Activision, they had a run of hits, I guess in the 80s,
0:06:37 early 80s, you know, they made a bunch of the top games for Atari systems. And then they went
0:06:41 bankrupt or they were about to go bankrupt. They had a decade of pathetic performance and then
0:06:46 finally went bankrupt. Okay, got it. So as long as a whimper, not a bang. And so how did you get
0:06:53 from building mice in your above the Burger King to buying Activision? So in 1987, there were no
0:06:59 real video game hardware companies. And I played a lot of video games as a kid and I loved Activision
0:07:05 games. So they made the original Atari 2600 games that made the company so successful. Games like
0:07:12 Pitfall and River 8 and Kaboom. And these are just great games. And so in 1987, I thought there’s a
0:07:18 great opportunity to make video game hardware. And nobody is making video game hardware games are
0:07:24 just played on personal computers. Nintendo was just coming to the US. So there was no
0:07:31 dedicated video game hardware. My best friend from growing up had just started a hedge fund
0:07:36 with this guy from Texas named Richard Rainwater. And they were looking for investments.
0:07:42 And I went to him and I said, I have this idea. And in 1987, in October, the market had crashed.
0:07:46 It was like a 500 point market crash was Black Monday. Black Monday was one of the
0:07:53 biggest crashes in the market history since the Great Depression. And I had been working
0:07:58 making software for, among other companies, Apple and Commodore. And Commodore was this
0:08:06 $900 million revenues company at the time with $150 million market value. And so I went to
0:08:10 my best friend and I said, we should buy Commodore. They have this computer called the Amiga.
0:08:14 And it has a keyboard and a disk drive, but we should pull the keyboard and the disk drive out of
0:08:20 it. And it would be the first 16 bit video game system. And it was designed by Exitari engineers
0:08:25 and was made basically as a video game. It was a big leap forward graphics performance at the time.
0:08:31 68,000 microprocessor and dedicated graphics processors. And it was like a really innovative
0:08:39 idea. And my best friend at the time said, yeah, let’s try and do this. And so we tried. And
0:08:45 ultimately couldn’t persuade the chairman of Commodore to do the deal. But I just became then
0:08:53 fixated with being in the video game business. And my best friend at the time was Eddie Lampert,
0:08:57 who then went on instead of buying Commodore to buy Sears and Kmart. And he was a customer for a
0:09:04 little while. We stopped extending credit to him. I think four years ago, though. So I thought, okay,
0:09:10 we have to be in the video game business. And I had a little side business that was a licensing
0:09:18 company. We licensed characters. So one of our licensing partners was Nintendo. And we were
0:09:25 licensing Nintendo characters for bedsheets and lunchboxes. And I knew the Nintendo people. And
0:09:30 one day I was having a Nintendo meeting. And they said, have you ever thought about
0:09:35 Activision? And I said, yeah, I know the company well, I played all the games. And they said,
0:09:39 they’re not in really good shape. And they’re about to lose a patent infringement judgment that
0:09:47 will probably make them bankrupt. So you should consider buying Activision. So I bought a 25%
0:09:53 stake in Activision for $440,000. And I became the largest shareholder.
0:10:00 And it was insolvent. But I tried to get the CEO on the phone to tell him I was his new largest
0:10:04 shareholder. It’s a public company. It’s a public company with a market cap of $1.6 million. Yeah,
0:10:12 $1.6 million. And a patent infringement judgment that made it insolvent. And so I couldn’t… Here’s
0:10:17 this company that’s doing horribly, has all these great franchises. And the CEO wouldn’t return my
0:10:22 phone call. And so I kept calling, kept calling. And finally I just thought, I’ll just go to the lobby
0:10:29 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.
0:10:34 And finally after three hours, he says, okay, I’ll come talk to you. And I talked to him and I
0:10:37 said, you know, we’re your largest shareholder. I have some really great ideas for you. I have
0:10:42 some game ideas I’d like to make. And, you know, I love some of the old properties. Maybe we can
0:10:47 figure out how to really get some of those properties back to being games. And he’s like,
0:10:52 well, thank you very much for visiting and nice to meet you. And I said, no, no, I’m like, when is
0:10:58 the next meeting? And he said, there’s not a next meeting, but we’re very happy to have you as
0:11:05 shareholders. And so I thought, well, how does that work? I own 25% of the company. I’m the
0:11:10 largest shareholder. We’re really a quarter of the furniture in the lobby. And he didn’t return my
0:11:14 phone calls for a little while. And then he agreed to have breakfast with me at this consumer
0:11:19 electronic show in Las Vegas. Obviously, Activision was then, you know, tremendously successful.
0:11:23 You then did one other really, really big deal that was transformative for the company, which was
0:11:27 and I don’t quite know how to describe it, but I think it’s a merger with Vivendi games
0:11:31 that resulted in Activision Blizzard, because Vivendi owned Blizzard, Blizzard, obviously,
0:11:35 World of Warcraft and all these other amazing properties. And then ultimately that partnership
0:11:38 on one, maybe you could tell us like that was a very, very big deal for you at the time.
0:11:44 How did that deal come about? So it was the spring of 2008. And I had a lot of anxiety about the
0:11:50 public markets and financial crisis is brewing. Yeah. And you could see there was a lot of
0:11:55 volatility instability. We were nervous, but we thought, you know, if we could buy something,
0:11:59 we had a big market value at the time. And I thought if we could buy something great,
0:12:04 that we really love, this would be a good time to do it. And you guys weren’t yet doing the massive
0:12:08 multiplayer. You guys weren’t yet doing like there was this big World of Warcraft had been a big hit
0:12:14 at that point. Huge hit. And we had explored doing a massively multiplayer persistent game.
0:12:19 There were a couple of other games before World of Warcraft that were massively multiplayer games,
0:12:25 but nothing that had had the success of WoW. And we looked and said, if we even could figure out
0:12:31 how to do it, it would take us five, six, seven years and a billion dollars. And the likelihood is
0:12:36 we wouldn’t do a good job of it. But it was a, and I knew the Blizzard team because we had worked
0:12:42 with them on, they were a contract development company in the early 1990s. And I knew the team
0:12:48 very well and really liked them. And I tried to recruit them out of the company. And I knew that
0:12:52 they had so much of a love and a passion for the company that no matter who owned it, they probably
0:12:57 wouldn’t leave. And I called the guys at Blizzard a bunch of times and said, we should truly try and
0:13:03 work this out. And they were stuck as a division of Vivendi Games, which was owned by Vivendi.
0:13:10 And you might describe what Vivendi was at this point. It was a big mess. And it was a former,
0:13:15 if I think it’s correct, it was a former public utility. Well, it was the water company of France
0:13:20 that this very, and by water and other things that flow through pipes. Yeah, water, other things that
0:13:26 flow through pipes. It was a collection of more industrial businesses that the, a man had taken
0:13:32 it over and decided he was going to become the media mogul of earth and bought universal studios.
0:13:38 And anything he could actually buy, he just bought. And then it got disassembled because
0:13:44 it was insolvent. And they ended up with a couple of businesses. The best one for them at the time
0:13:51 was probably Universal Music, which I think Lucine is here somewhere. So they had Universal Music.
0:13:58 They owned Morocco Telecom, Upstake. They owned SFR, which is a French mobile company.
0:14:04 They own Kennel Police. And somehow they managed as a part of a bunch of things to own
0:14:10 this games business, which included Blizzard. And I asked them to sell us Blizzard. And we didn’t
0:14:14 have any interest in the rest of their games business, but we wanted Blizzard. And they said,
0:14:20 no, repeatedly. And we offered them $4 billion and then $5 billion and then $6 billion and then $7
0:14:25 billion. They kept saying, no, they like video games. So we came up with this idea and we said,
0:14:31 how about this? We’ll stay a public company. You sell us Blizzard or give us Blizzard and $2
0:14:38 billion of cash, and we’ll give you 51% of the company. And my view was in 2008, even the biggest
0:14:45 institutional investors no longer were really long-term holders. And all the big institutional
0:14:49 investors were trading in and out of the stocks like they were hedge funds. So if we could get
0:14:56 Vivendi to own 51% of our company, we got Blizzard as a partner, we would have a great business and
0:15:01 a stable shareholder who would never sell our stock and would be enthusiastic about investing,
0:15:07 at least what they told us, investing with us for the future. So we went back and forth for a
0:15:13 long time, finally negotiated a deal where they would do that deal. And I almost blew the deal
0:15:19 in the worst way too. They had this beautiful headquarters in France, like the nicest building
0:15:23 in France. And the guy who had put the original Vivendi together, there were lots of these
0:15:29 beautiful French offices that had gardens on the top of their roof. He built a park
0:15:36 and like mature trees on the top of the Vivendi building. It was like a park with trees that
0:15:41 were all over the place. And one room was like a wine cellar and one room was this magnificent
0:15:46 dining room. And so we’re standing on the top of this roof overlooking the Arc de Triomphe
0:15:54 and the Eiffel Tower. And the chairman of the Vivendi says to me, “Bobby, this building,
0:15:59 it will be your home. This will be your place. You can do your business in France and you should
0:16:03 treat this building like your home. You can do anything you want with this building, but it will
0:16:08 be your place for Paris. You can make a business here. And it’s the most beautiful building in
0:16:13 Paris. It’s the most beautiful view in Paris and it’s for you. You can do anything you want with
0:16:19 it.” And I said, “Anything? You can do anything.” And I said, “Can I build 20 stories of condominiums?”
0:16:26 And he turned white and I could see the like, “Oh my God, who are we getting in business with love?”
0:16:31 I was going to say, “He hadn’t been briefed.” And I said, “No, no, Jean-Marie, I’m just kidding.
0:16:37 We would only build 10 stories.” But he still went through with the deal. And so we had five
0:16:45 wonderful years with them as our 51% shareholder until they were forced to sell our stake. But it
0:16:49 was the thing that actually allowed us to acquire a business. So it’s a big deal. I mean, it’s really
0:16:53 uncharacteristic for a company like this with a founder really of the modern business and then a
0:16:57 CEO like you to be willing to sign over control. So that story to me makes a lot of sense if you’d
0:17:05 said 49%. What was it about that deal that made you willing to literally sign up? Because it
0:17:09 worked out well with that. Was it a pretty big risk at the time or not? I didn’t really think I
0:17:16 was selling control. I think I was selling 51%, but I thought they really know nothing about video
0:17:22 games. What are they going to do? And I don’t think they’re going to interfere all that much. I was
0:17:26 actually wrong. They didn’t really have, you know, it’s like a corporate holding company. So they
0:17:32 were always trying to justify their value as a corporate holding company. And you know, we had
0:17:38 like, I remember the, and Lucien who’s here will attest to this is exactly what happened. But
0:17:43 they said we’re having a synergy meeting and all the business unit heads need to come together
0:17:50 for the synergy meeting. Now they own a stake in Morocco telecom. We didn’t do business in Morocco.
0:17:56 They own SFR, the French telephone company and mobile games wasn’t really a thing at that time.
0:18:01 They own Canal Plus. So a French TV network didn’t really have any applicability and
0:18:06 universal music where we did license some music for Guitar Hero, but other than that we had no
0:18:11 relationship and a broadband company in Brazil. So we all get together and have this big synergy
0:18:15 meeting. And then we had to go around the room and say the synergies that we identified between
0:18:23 each other. And they got to me and I said that Morocco telecom, we went to their cafeteria
0:18:30 and they have tagine. And we got the tagine recipe for our cafeteria,
0:18:42 which I thought was a great synergy because I like tagine, but there wasn’t really that much
0:18:48 synergy. So then they had to sell us back their stake. And then it was completely unwinding,
0:18:53 ultimately. And I guess they completely unwound in their own way. And everybody did well.
0:18:57 So it turned out. So give us a kind of a state of the video games industry today,
0:19:03 gigantic global phenomenon, lots and lots of change and flux, lots of potential controversy.
0:19:09 So I would say of the 28 years I’ve been doing Activision, 30-some-odd years I’ve been doing
0:19:16 software, I’ve never seen more opportunities than exist today. Markets that are opening. And you
0:19:22 think just 10 years ago, if you wanted to play video games, you either needed $1,000 PC or $300
0:19:27 or $400 video game console. And there really weren’t any other ways to play video games. But
0:19:34 phones have ushered in this whole new opportunity. And like for years, for most of the tenure that
0:19:41 I’ve had as CEO, we sold in developed countries to middle-class consumers on expensive devices.
0:19:47 Today, we sell in 196 countries around the world. We have 400 million customers.
0:19:56 And anyone in any socioeconomic strat can actually play games. I think that was the biggest shift
0:20:01 that took place is now you truly have a global market. The second thing that then happened is
0:20:08 when you started to see the games become more social experiences. I can use a headset. I can
0:20:12 talk to the person I’m playing with. I can play with somebody from anywhere around the world.
0:20:19 The introduction of the social experience was the true transformation to me of the opportunity.
0:20:24 And so where you look out in the world today, you have a global audience. You have this ability
0:20:31 to create this true social experience. And I remember years ago hearing this, and I’ll paraphrase,
0:20:36 but Mandela had this definition of sport, that it was the great equalizer. And it was this thing
0:20:42 that allowed you to actually break racial barriers and religious barriers and economic barriers in
0:20:48 order to foster competition and that the great competitors in sport could come from anywhere.
0:20:53 And everybody felt this ability to have a sense of belonging and purpose and meaning. And that
0:21:00 is what video games has become for so many people. And it’s hard to illustrate this for some people,
0:21:05 but I was at a panel not long ago with Alex Rodriguez, who actually owns one of our Overwatch
0:21:13 team franchises, and Roger Goodell, who is the NFL commissioner. And the moderator said, “Are eSports
0:21:20 sports?” And I said, “The same characteristics that Mandela described, what makes sport great
0:21:26 is what makes eSports so compelling and engaging.” And I said, “To Alex, stand up.”
0:21:34 And Alex stood up and I said, “Look at you. How many people in the world can play professional
0:21:38 baseball?” And he said, “Well, there are roughly 1,200 professional baseball players in the
0:21:45 Major League Baseball and about 3,000 capable of playing Major League Baseball.” And I said,
0:21:52 “Look at this guy. Like this is like the most fit athletic specimen of a human on the earth.
0:21:58 And there are only 3,000 of those people who can do what he does. Video games is the only
0:22:03 competitive medium that is going to give me that experience and that purpose and that sense of
0:22:07 belonging and that camaraderie that you get from sport.” And so, of course, it’s going to be
0:22:13 as popular as sport, if not more popular than sport. And that, I think, more than anything, is now
0:22:19 what we see as driving consumption and engagement and interest and passion. And we’re just scratching
0:22:24 the surface of opportunity. So I think people have obviously had a lot of great experiences
0:22:27 and a great faith in the video game industry for many years, based on the idea that everybody
0:22:32 can participate. This idea that people are going to voluntarily watch other people playing video
0:22:37 games is a new idea. And obviously it’s becoming a twitch and one of our companies and so forth.
0:22:42 Like this is going to be a very big phenomenon. It’s a key part of eSports is the ability to
0:22:45 fill an arena with people watching other people play video games. Like a few years ago,
0:22:50 that just sounded wildly implausible. What was the point? Like, when did you figure that out?
0:22:55 Well, I think probably when we launched. I didn’t own Blizzard at the time, but when Starcraft
0:23:00 launched, this was a game that in Korea, I think at the height of its popularity. Rob’s here,
0:23:05 so he’ll know the exact number. But I think, you know, this is more than a decade ago, but the
0:23:11 height of its popularity in Korea, Starcraft had 5 million registered players. Now this is a country
0:23:18 of 60 million people. The game is primarily a male game experience. And so you think about 20% of
0:23:24 the population actually of the male population played, or was a registered player of Starcraft.
0:23:30 And we saw arenas getting filled with spectators. There were three dedicated cable channels in
0:23:34 South Korea that just broadcast Starcraft competition. There were sponsors. There were
0:23:40 professional players making $100,000 or more. So this is an amazing phenomena that took place that
0:23:45 we looked at as purely marketing. You know, the people are enthusiastic. We saw the box. There was
0:23:51 nothing more to it than that. And we managed to do every single thing wrong in commercializing the
0:23:58 eSport of Starcraft. But it was the first time where I really thought, you know, there’s something
0:24:04 that could even be bigger than the games themselves that would relate to the spectator experience.
0:24:10 Now, even with games like Overwatch, which is probably our most successful eSport initiative,
0:24:16 it’s more like golf. So if you’re a spectator of Overwatch, it’s likely you’re a player of
0:24:24 Overwatch. Fortnite, I think, was the first game where people would spectate and it would actually
0:24:30 be a catalyst for them to play. And so I think what’s happened is it’s more of a social experience
0:24:35 in a lot of respects than it is just a game. But I think that what you’re now starting to see is
0:24:41 that games have so infiltrated the popular culture of the world that it’s exciting for people to watch
0:24:45 their heroes who compete against each other in the same way as sport.
0:24:50 Right. So many of the most successful games that people watch or that are now actually
0:24:53 formerly eSports, correct me if I’m wrong, they were not originally designed for this
0:24:56 period. They were designed to be games that people just played and they’ve been kind of repurposed
0:25:00 into this kind of broader public phenomenon. Maybe that’s to play untrue, but I guess my question
0:25:06 is kind of how will video games be designed going forward for eSports and for people watching it in
0:25:10 addition to playing that is different than how video games have been designed up to this point?
0:25:14 Yeah, that’s a great question. So a lot of the games today were not specifically designed for
0:25:21 spectating, which is why you end up with that phenomenon of the players are the spectators.
0:25:29 In order to have a more broad appeal spectator experience, the games need to be designed in a
0:25:33 way that you actually want to watch them, whether you do or don’t play them. And I would say that
0:25:40 the Overwatch team spent a lot of time early on trying to construct a game from the ground up
0:25:45 that would be a fun spectator experience. But I think what you will see is that people are now
0:25:51 paying more attention to in game design, the idea that the games may be spectated by people who
0:25:56 aren’t players. I don’t think anytime soon that’s going to be the primary consideration. We’ll still
0:26:05 be principally focused on gameplay, but things like camera angles and commentating and making sure
0:26:10 like when we organized the Overwatch League, one of the organizing principles was the reason why
0:26:17 sports are so successful is tribalism and that having a local affiliation was so crucial to the
0:26:22 success of sport, whether it’s a country affiliation or city affiliation. So we created a structure
0:26:29 that allowed for 28 independent cities to field teams. And I think that as you start to take those
0:26:34 considerations into play when you’re thinking about the design of the games or the leagues or the
0:26:39 competitive experience, that they will have more of the characteristics of traditional sport.
0:26:42 Right. Would you venture a guess as to when video games will be in the Olympics?
0:26:46 Which is a logical implication of what we’re discussing, right?
0:26:51 I don’t think so. I actually don’t think like the Olympics has never been about
0:26:57 a commercial enterprise. And so if you think of the analog, right, there’s not like if you had to
0:27:04 pick a game, you’re now endorsing someone’s commercial enterprise. You know, there’s not any,
0:27:11 there’s they don’t have that analog today. And so I don’t know that you could see the logical
0:27:16 jump to the Olympics. Okay. The video game industry seems to have a particularly cute version of a
0:27:21 dynamic that you see with, you know, let’s just say consumer properties that inspire an avid fandom.
0:27:24 So it’s the enthusiastic early adopters, right? And so you see this with movies,
0:27:28 you see this with TV shows, you see this with basically things that really occupy the popular
0:27:33 imagination. You know, for sure see it with video games. So you’ve got this kind of leading edge,
0:27:38 you might say early adopters slash super enthusiastic user base, and they start to develop
0:27:42 opinions and they start to develop opinions that maybe the people who make the games are quite
0:27:46 doing what they want. And then when things, you know, really go sideways, there can be, you know,
0:27:50 protestant boycoss and all kinds of like, you can end up with the inmates running the asylum or at
0:27:54 least looking like they’re certainly trying to, how do you throw the needle as somebody who make
0:27:58 an overseas letters? How do you how do you throw the needle for the early adopter base as opposed to
0:28:02 the mainstream? And how much is the early adopter base an asset? How much is the early adopter base
0:28:08 a challenge, a problem? So I think that the difference between film or television, you know,
0:28:14 a great film, you’re going to spend two hours of your life watching. You know, great TV shows,
0:28:20 it’s going to be 13 episodes or 22 episodes a season. You know, it’s going to be 13 or 22 hours.
0:28:28 Video game, our average duration of gameplay that includes games like Candy Crush is an hour per
0:28:36 person per day. Games like Call of Duty or World of Warcraft are hours a day. So the interest in
0:28:41 the engagement and the commitment that you’re making to that form of media is so different
0:28:50 than film and television. In my view, you have the right to have a strong opinion and voice your
0:28:56 opinion in exchange for making that hour plus commitment a day, which becomes more of a lifestyle.
0:29:02 And so instead, you know, I think some companies run and hide and don’t really engage their user
0:29:08 base. But I think we have users and players who will and audience members who will tell you
0:29:14 and give you really good insight into how you can modify and adapt your game. So you listen to
0:29:20 them and they’re not always right. But oftentimes they’re pretty and especially when you hear the
0:29:27 sort of the mass view, they’re pretty right. The beauty of our business though is that if you
0:29:31 can get out in front of it early, let people actually have an experience with the game,
0:29:36 get the feedback and you’re willing to take that feedback and enhance and improve and modify the
0:29:40 games. It’s a great roadmap for innovation. So I’d like to ask you about two games that I think
0:29:44 are arguably transformative from a conceptual standpoint for gaming. And you tell me what
0:29:48 you think or maybe describe what you think are the structural significance of each of these.
0:29:52 And so the first is Fortnite. And you alluded to one of the dramatic changes. So maybe describe
0:29:57 like what is the significance of Fortnite to the industry? So for starters, there’s this perception
0:30:02 that Fortnite is an overnight success. It’s not epic. The company that made it has been in the
0:30:07 video game. Tim has been in the game business almost as long as I have been. And they are excellent
0:30:15 at making games. And what they did was to really spend the time in a very focused, determined way
0:30:20 taking the Unreal Engine and turning it to something that was going to be a broad appeal,
0:30:25 very compelling social experience. And I think the aspiration was build the social network that’s
0:30:32 anchored in a game conceit. And they made it cross-platform in its playability. They made it
0:30:39 very accessible. They changed the way that they deliver content to season. So moved from the
0:30:45 feature film model to the serialized television model. And it’s really fun. And they managed to
0:30:52 do what you probably can’t do intentionally, but capture the popular cultural zeitgeist.
0:30:58 And the other thing is that it doesn’t require you to make a two hour a day investment. You know,
0:31:04 you can have a 20 minute experience that is really satisfying. But this is not accidental. You know,
0:31:08 these guys have been doing this for a very long time. And I think what it has started to do is
0:31:14 broaden the appeal of games to people who might never have played games before.
0:31:17 And then what is the significance of Pokemon Go? And by the way, for people who don’t actually
0:31:21 just saw this yesterday, Pokemon Go, third party report. But the report was revenue last month was
0:31:26 still in the order of $75 million. So it’s still something like a billion dollar a year revenue
0:31:30 business today. And this is where the game is now what, two years old or something like that.
0:31:31 Almost three years.
0:31:34 At least rumor has it that they have new stuff coming. But it’s been a giant hit.
0:31:38 Again, it’s like, where’s the innovation there? But it’s like, you know,
0:31:44 Nintendo is really great at innovations that are very physical in their nature. So the Wii,
0:31:50 that moment I was describing to you about the Macintosh, when I first saw the prototype of the
0:31:57 Wii, it was like that equivalent goose bump moment. I was in Kyoto and I went into his room
0:32:04 and there was a TV and it wasn’t like an LED. It was an actual tube TV. And there was a pond that
0:32:10 was on the screen, like a little cartoon pond with little bubbles popping up from every once in a
0:32:15 while. And the head of Nintendo at the time was a guy named Iwata-san. And he gave me the controller.
0:32:19 And I held the controller and I just started going like this. And all of a sudden you could feel
0:32:26 the tension of the controller and the motion control of the controller. And I started to like
0:32:31 fish around and I grabbed the fish and I pulled the fish out. And I thought that video games
0:32:38 will be completely transformed. Nothing had really taken the physical experience in video games to
0:32:45 that level. And I think that what Pokemon Go did is something very similar. But it created this
0:32:52 physical experience that I think it was the first time AR had been executed on a broad scale.
0:32:59 And so I haven’t seen anything in gaming that I would tell you has really captured the imagination
0:33:06 of people on a broad scale using AR besides Pokemon Go. But I would say when you look at
0:33:09 where some of the next big innovations in gaming, including what we’re working on,
0:33:15 AR is going to have more near-term impact than VR. Amazing. Okay, good. And then final closing
0:33:19 question. What’s the one Activision game that has come out this year that people really have to
0:33:24 play? And then I know it may pain you, but I’m going to ask you, what’s the best non-activision game
0:33:29 that has come out this year that people really have to play? So I would say Call of Duty Blackhouse
0:33:35 4, which we just released, the blackout mode of Call of Duty Blackhouse 4 is so incredibly fun to
0:33:40 play. And what is that? What is that mode? It’s like a PUBG mode. It’s like a battle royale mode.
0:33:47 And it’s super fun to play. And you can do it in like small 25 minute increments, but very accessible,
0:33:53 very fun to play. I haven’t played Red Dead Redemption yet, but I want to. And I would say of the things
0:33:59 that have come out this year, I think it looks like Westerns are very hard to do because they’re
0:34:04 very American in their field. But the game looks fantastic. And everybody they know has played
0:34:08 it. Is that a lot of fun playing it? Yeah, fantastic. And I think we have party favorites. We brought
0:34:11 Call of Duty for everybody. Call of Duty. So I believe everybody’s going to have a copy of Call of
0:34:18 Duty. Bobby, thank you so much. Mark, thank you very much.