The DeanBeat: The best nuggets from a summer of game leader interviews

Disclosure: The organizers of ChinaJoy paid my way to Shanghai. Our coverage remains objective.

One of the best things about my job is talking to smart people about games. That’s one of the things I’ll enjoy about our conferences like our upcoming GamesBeat 2015 event, on Oct. 12-13 in San Francisco. We want to always find the right people to interview that our readers and event attendees want to hear from.

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In years past, I had to interview most of my summer interviewees at the Electronic Entertainment Expo (E3) during June. And I did interview a lot of interesting CEOs and developers at that show. Then a long, dull summer comes next.

But this year, the news hasn’t slowed down, and I traveled to ChinaJoy in Shanghai, where I was able to meet with even more CEOs, including some visitors from the U.S. The result has been a lot of interesting exchanges with some of the top minds in the gaming business. This column focuses on some of the most interesting quotes from those interviews, some of which have already been published and some that are still waiting in the wings. Here’s some condensed versions of those interviews below.

Tim Sweeney gave a very interesting talk at ChinaJoy about gaming technology, including augmented reality. He observed that if augmented reality glasses are perfected in the next decade, we won’t need TVs, computer monitors, or even smartphone displays anymore. He also made me very curious about the technology at augmented reality firm Magic Leap, a Florida startup that has raised $500 million from Google. I talked to him at the show about his prediction.

Tim Sweeney: “If you think about it, it’s going to be a real boon. Everyone will have an awesome television that’s 40 feet wide, and you can display it anywhere in your house. The amount of material needed to manufacture AR will be much smaller than TVs or computers or any of these other devices. It’ll be very economical.”

We’re definitely on track to that. There have been a lot of studies on exactly what is the resolution of the human visual system. It’s fairly clear that it’s less than 8000 pixels by 8000 pixels. That’s the maximum quality of graphics we can appreciate. You could go to a display like that right now if you were sufficiently motivated.

Chipmaking has been driven by Moore’s Law. They’re building billion-transistor chips. But there hasn’t been as much drive behind displays until recent times, until the Retina display revolution. As that technology is pushed harder, we’re just a couple of generations away from displays that are 8K by 8K per eye times two eyes. There you have a display that’s indistinguishable from reality.

The real interesting things with VR and AR start to happen when you have custom-manufactured display devices aimed just at those applications. Right now everybody’s devices are reusing mobile phone displays, augmenting them with lenses and other systems to purpose them for VR. Once you have custom display systems, the level of realism is going to go up very quickly.

Mark Rein and I visited MagicLeap a few months ago. I had no idea that some of the things they were doing were even possible. I can’t talk about some things because of the NDA, but it was like stepping into a Harry Potter movie, seeing all these magical inventions that we hadn’t seen before. There will be a lot of very rapid progress there in all areas. Their light field cameras and light field displays, some of the long term solutions for displaying a 3D image with proper depth of field, new display devices, new input devices, cameras that can capture scenes in full 3D — they’ve put together all the different components you need.

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I asked Robert Xiao, chief executive of Chinese game publisher Perfect World, about the Chinese government’s suggestion that the country’s game publishers take their content to the global stage.

Robert Xiao: The government is doing a lot of surveys on the industry and encouraging the industry to move globally. We’re leading the pack, I have to say. For us, it’s not only about Chinese intellectual property. It’s about using a blended culture. If I could use a maybe not-so-appropriate comparison, it’s like the Hollywood way. Mulan was a traditional Chinese story and a traditional Chinese character fit into an animation product that could appeal to a global audience. Things like Chinese kung fu and the Chinese symbol of the panda became Hollywood products that were accepted on a global basis.

That’s the right way to do it. It doesn’t matter exactly where the thing comes from, whatever cultural element you’re using. The way you use that cultural element, plus a modern process of production, plus a value expression that fits with the majority of consumers’ needs globally — that’s what I call a globalized view. We will use a lot of Chinese elements, as well as a lot of American elements, in different projects with different teams.

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We want to do global development. Say I have a Chinese cultural element. I’ll use a Japanese artist who understands this element to form it into characters. I’ll use American designers to build the storyline and design the interaction with the game. I’ll use technologists in China to create the servers and the engine. I’ll use the Chengdu team to mass-produce graphical assets. That all combines to form a true global project.

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Mark Pincus, CEO of Zynga, gave me an interview yesterday, talking about his second-quarter earnings. But he also talked about his long-term vision.

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Mark Pincus: I believe in our founding fundamental vision of social gaming. More so now than when I pulled you aside in that Starbucks at whatever game conference, when I was trying to pitch you that poker could be a social game. I’m still pitching you on it.

I believe in the opportunities for social gaming. It’s overlapping with mobile gaming and lots of video gaming, but it’s still different. It’s all getting more blurry as hardcore games and console games talk about being social. We’re not there yet, but I think social gaming wants to be a whole medium, in the same way that social networking and social media are mediums. Over the next 10 years, people are going to do social networking and social media in and around their game-playing. We’re seeing early signs of this, but I don’t think we’re there yet. I see a lot of room for us to invest and innovate and differentiate there.

The second pillar is getting the company back to intensely focusing on being player-centric and data-driven. Investing deeply to arm our teams with the world’s best data and analytics and metrics capabilities. Then seeing that get operationalized into the way that we invest our engineering days and our game design cycles.

I want to deliver on the promise that 80 percent of our engineering days are delivering clear value for our players. That’s a very ambitious goal. I want to deliver on the promise that we’re testing more ideas in a week than anyone else in the world. We’re learning faster about what our players want and delivering it faster as well.

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The third pillar is getting back to our founding values of being empowered entrepreneurs. We have amazing people inside our company. Half our battle is just to unlock their creativity and energy, to point to the right hill and get out of their way. That’s what we built the company on. That’s what I’m working every day to get back to.

It’s less about my confidence in my ability to get us there and more about the team. If the leadership team and I create the conditions for success for our teams — empower them, arm them, focus them on the right hills — then they’re going to do the rest.

 

In Shanghai, I interviewed Michael Chen, CEO of iDreamSky, the publicly traded mobile-first gaming company based in Shenzhen, China. His company has more than 800 employees, and it has published titles such as Fruit Ninja in China. He told me what he thought of China’s stock market fall and its impact on gaming companies.

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Michael Chen: What’s happening to the Chinese stock market was kind of expected. No one knew when it was going to happen, but anyone who was realistic and rational anticipated it. With all the Chinese companies listed in the west, though, this probably won’t affect much of what they’re doing. None of the U.S.-listed companies were expecting, when they came back, for the market to still be that crazy, with companies around 100 times P.E. We don’t think that’s healthy anyway.

What’s happening right now is a good thing in the long run. In a crash like this, a lot of people do lose money. There’s bloodshed. But without a drop like this, the market won’t mature. Now public investors and fund investors will be more cautious. They’ll start really looking into a company’s vision. They won’t just buy into big talk. This will definitely mature the market.

Normally, the gaming market is kind of disconnected from the stock market. But when the stock market is so hot, it affects how publishers and other listed companies invest, because there’s so much more money there. Because money came so easily, they would invest in a way that’s less cautious. When people do that, what happens is, a lot of bad companies draw investment, and even a lot of good companies fall into bad habits. They think they can just talk a good game and make money, instead of going through a real process — doing the market research, creating a good prototype, and then looking for investment.

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Kevin Chou, chief executive of mobile gaming company Kabam, talked to me about the challenge of beating the big three of mobile games: Supercell’s Clash of Clans, Machine Zone’s Game of War: Fire Age, and King’s Candy Crush Saga.

Kevin Chou: I think of it as a big opportunity. It’s a problem, in the entertainment industry, to have uncertainty about where your next hit will come from and how long that hit will last. Those two primary questions are the key challenges for the whole industry. When it comes to the second one, it used to be that the top-grossing charts changed every month. Even if you had a hit, one or two months later you weren’t nearly as relevant anymore. The economics weren’t compelling. It only cost half a million dollars to make a top-grossing game, but it didn’t last that long and only made a few million. That’s okay, but it’s not a great business.

Great businesses are what we’re starting to see today. It costs somewhere in the mid-seven figures to make a great game, but if you’re successful, that could be a $5 billion game. My personal prediction for Clash of Clans is $5 billion over its lifetime. Those are compelling economics. The fact that you can make a game last for years and years is incredible.

I do sympathize with some of the indies out there, when they look at the top of the charts and see nothing moving there. But if you really want to build a business to eventually stand toe to toe with EA or Activision, these great gaming companies, you have to have predictability when it comes to at least the duration of a hit, of a franchise.

The next question is, where is the next hit coming from? That has a little bit more predictability these days as well. We’ve been lucky as a company. Marvel is our fifth game to cross $100 million. We don’t have a $5 billion game, but I feel like we have an interesting model at this point.

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Kevin Bachus, senior vice president of games at Dave & Buster’s, talked about why prize-based arcade games are still alive, and how his company is making mobile games based on the popular games in the company’s restaurants.

Kevin Bachus: I think it comes back, again, to the redemption thing. 10 or 15 years ago, after the revitalization of arcades that was brought on by fighting games like Street Fighter, the arcade businesses in Japan and the U.S. both started to decline. The U.S. pulled out of it by discovering redemption games. That changed everything. Right now, about 83 percent of our games revenue comes from redemption games. If you look at the time people spend, it’s more even, but the vast majority of the revenue comes from redemption.

The games are very easy. They have very broad appeal. It’s a unique proposition. I’m fond of saying that no matter how much you like playing your Xbox, you’re never going to win an iPad at it. That changes the complexion. We bring in a much more casual, much broader audience, but because they’re casual, they’re not very frequent visitors.

Japan is the exact opposite, because redemption games are illegal in Japan outside of pachinko and slot parlors. If you go to a typical arcade in Japan, it’s just for entertainment. As a result, the games over there are much more sophisticated, much more complex, and use a lot of network capabilities. They cater to a much smaller audience, but a much more dedicated one. It’s like the console business was 15 years ago. You have a small number of people, the core players.

It’s kind of six of one, half a dozen of the other. They have a small number of very frequent players. We have a much larger number of relatively casual players. That’s why networking is so important over there. But over here, although we represent something like a third of total industry revenues, for a game manufacturer, we’re lucky if we’re maybe five percent of their revenues. We have 77 locations, but there are something like 6,000 locations in the U.S. overall that have coin-op amusement games.