In the middle of talking about why I struggle to believe the hype around Oculus Rift and Facebook I made a comment about why trust was a big issue, and why for game developers it’s not simply a matter of telling them to get over it. And this:
(which betrays a big disconnect between how the Valley thinks and how games people think, but that’s for another day)
A few people asked me what that meant. There are many disconnects between how the games industry thinks compared to how the tech industry thinks it should. To the tech guy the games industry is at the bleeding edge in some ways but way behind in others. Whereas to the games guy the tech (most especially the Valley) industry is built on nothing but flimflam. Tech and games are essentially a pair of estranged sisters. They come from a common root, but they have evolved into separate species.
If you’re a games person then Klout makes no sense. The idea to give experience points to reflect your popularity in social media seems like the most incidental thing that a person could ever dream up. It has no viable business model and is just silly. To games people it’s not worth a farthing, and so the news that Klout sold to Lithium for $200m doesn’t just cause head scratching. It’s downright confounding.
The corollary example is Zynga: While many games people dislike Zynga from an ethical standpoint, the company has a real business model. One which, when conditions were good, made money hand over fist and dragged tens of millions of users into individual games. Zynga may have been a number of things, but it was relatively sound as a business. And yet when it went to IPO Zynga’s shares tanked even though it could claim to have real revenue. Again to games people this makes little sense.
I know a number of tech people who also think the Klout story is a little on the ridiculous side, and plenty of Zynga watchers who’ll point to its reliance on Facebook as a strategic weakness. Yet both stories depict a key difference between what game and Valley people value. Games people tend to value revenue where Valley people tend to value potential.
To most game makers the question of revenue is ever-present. A relative few might be in a benighted position where they don’t have to worry, but for the majority this is simply not the case. They operate in app landscapes, on closed or open platforms and are always worried about paying bills, servicing their games and building their franchises. From the smallest indie through to the biggest publisher one of the biggest issues that will determine the success of any contract will be revenue share.
However Valley types operate in a super-financed environment and that changes priorities. In that world every technology is essentially an opportunity to ride a rocket. The goal is rarely to sell a material product or units, but instead to sell a platform or a technology, and the sense of what might be done with that technology is a story that can be painted in the clouds. In that world cash is important to a point, but its primary purpose is to facilitate growth of the story.
Studio ≠ Startup
Those of you who’ve read your Lean Startup know that the whole purpose of a startup is to learn, to validate an idea and figure out a way to scale it into a business. Tech people often assume that a game development studio is a essentially a startup, but usually it is not. There are some examples of gaming startups that practice the lean model and then accelerate (Zynga again), but most game developers are essentially agency businesses. They exist in a world of for-hire contracts, often working on licensed content or similar. It’s rare that such companies ever get to the point of developing an asset valuable on its own terms as a result.
Meanwhile those that work on their own games tend to do so as indies. Again, “indie” is not the same as “startup”. Indies are more like the games industry’s Sundance filmmakers. They don’t want to get rich, and they especially don’t want to validate and scale a business. Instead they want to create a game and playtest it to make it better, even exposing to players early to get that feedback. But the product always comes from the heart first and it’s up to the business to figure out a way to fit around it rather than a customer.
Attitudes To Selling
Why is equity valuable in the Valley? Because it’s assumed that the entire point of the business is to exit or IPO. From a certain point of view, a Klout only exists in order to make a big exit for a relatively small investment, and that exit fuels any number of further investments. However if you take the exit/IPO option away then equity becomes what exactly? Shares that’ll never multiply in value. They become deadweight unless you can get percentages of revenue or profit, which is impossible for many Valley businesses. The sale is necessary, vital even, to keep the wheels turning.
But most games people don’t want to sell. Like ever, if possible. Maybe they’ll sell to retire, get bored or if business conditions change such that their studio is no longer viable. But mostly not. Instead what they value is creative freedom to make the games they want to make, opportunities to make awesome games and opportunities to make money selling games. And that’s it. Only a few really want to get into the technology business, or anything that doesn’t involve getting to make games.
Where successful Valley companies tend to become platforms or technologies incorporated into others’ platforms, game companies tend to stick as product companies. They make franchises and then run them for the long haul. Many of the world’s most successful game companies are comparatively static operations that simply sit on a couple of successful franchises and remake them over and over. Likewise many successful indies only dream of being able to keep being indie.
Chasing Users vs Stability
The Valley person thinks early about how their product or service must be where the customer is. They worry a lot about paradigms, about being able to address the customer and ensure that the use of that product. This can lead to the appearance of fashionability (desktop is dead, you need to be on mobile etc) but it’s more a reflection of shifting device usage. Apply that thinking to games and it’s apparent why Valley types are big fans of ideas like game/life crossover apps, games that work across multiple platforms to provide transmedia experiences and so on.
Games people tend to think in terms of one presentation at a time, and one platform at a time (even with new technologies like Unity3D that facilitate easier translation from one platform to the next). While some games people have enough appetite for risk to take chances on new platforms early (and often to great success) the majority tend to be slow to move. This is why Facebook gaming left so many established studios scratching their heads, but also later feeling validated when that business became unsound.
New platforms like smartwatches may come today but go tomorrow, games people think, but there will always be PCs. Indeed it’s amazing how long it takes some of them to even get as far as a Mac build. Games people believe that the player will come to them. They’re used to markets where players lay out big monies for gaming machines like top-end consoles or PCs solely for gaming, and to the idea that pollination of the game experience between platforms is both hard to do and not that valuable. Game makers prefer to wait and know that a platform is a sure thing before diving in, and they actively dislike disruption.
Another big difference is that games are a form of culture whereas technologies are merely tools. While the tech world clearly makes tools that the whole world can use, it’s rare that tools become an object of passion outside of the technology community. But games are like comics, music or blockbuster movies. They attract fans to their cultural totems and bind a community around them. To some people games matter a great deal, as do all the other cultural mores that go with them. Games people understand the value of that.
Why is Notch’s canceling of Minecraft on Oculus Rift such a big deal? Because Notch is a cultural leader. Millions of fans all around the world consider him as important to them as many a kid might affiliate with a band. Also because the sale of Oculus to Facebook is perceived as selling out (in the bad way) sacrificing creative ideals for cash. And that kind of thing is bad news because – for all the metaverse speculation about what Rift might be – VR is always likely to be about games. Unless of course game makers don’t want to touch the sellout platform, in which case Rift is a technology for nobody.
That’s a harsh reading of that particular situation but it’s said to make a point. In the Valley world forgiveness is easy to come by because the focus of the community is on business opportunities. They may laugh at the travails of a Myspace, but technology writers will often be relatively uncritical and willing to see the best in what a promising startup might do. Games writers, on the other hand, are fierce critics with long memories. Especially once a game has launched.
The gaming community has the same sort of tribal associations that we might associate with fanboy or otaku of all types. It also has very deep loyalties. Just this weekend, for example, a large portion of the community traveled to Boston just to see what’s coming up in the world of games. PAX East is but one of many shows in the US and around the world, from E3, GDC and PAX Prime through to Gamescom and Eurogamer Expo. Some of these events are attended by hundreds of thousands of fans.
It’s not that the tech industry doesn’t have big events too, but my point is that the composition and function of these events is very different. At games events the topics tend to be much broader than product introductions or developer days. Issues like diversity and cultural inclusiveness, heritage and tradition, preservation and so on play a large part in their conversation.
What it comes down to from the Valley side is folks not getting that games mostly operate by the rules of show business rather than products or services. Game developers make games to entertain and organize themselves around that goal, but Valley people don’t know how that business is supposed to flip. Valley people seem to have a blasé attitude to bottom line concerns that games people find maddening, yet they sit on all the cash.
There are some corners of games that have behaved like a product business from time to time (such as social games) but the bulk of the games industry dances to a different beat. Valley people often say that they’re just not that interested in content plays, but really what that means is they have no affinity for the rules of the games business other than to know it’s very different.
Will they ever reconcile?