a16z Podcast | Gaming Goes Mainstream

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/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Sonal?

  Hi, everyone. Welcome to the A6 and Z Podcast. Today's episode features Marc Andreessen interviewing Bobby Kodick, 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 a6andz.com/summit. Please note that the content here is for informational purposes only,

• 0:44Sonal?

  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 a6andz.com/disclosures.

• 0:55Marc Andreessen?

  So Bobby, it is really fun as a longtime 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.

• 1:12Speaker 02

  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.

• 1:26Marc Andreessen?

  The Lisa was the Mac before the Mac.

• 1:29Speaker 02

  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 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,

• 2:13Speaker 02

  all for the Apple II with a graphical user interface about a year before the Macintosh was released.

• 2:18Marc Andreessen?

  You also, I believe, credit, if I'm correct, Steve Jobs with convincing you to drop out of college?

• 2:23Speaker 02

  I don't know if it's credit, but Steve Jobs heard about us.

• 2:25Marc Andreessen?

  Because when you started, you're in college.

• 2:27Speaker 02

  I was in college.

• 2:28Marc Andreessen?

  You're in college.

• 2:28Speaker 02

  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."

• 2:43Marc Andreessen?

  Steve is like, super famous, like, cover of Time Magazine.

• 2:46Speaker 02

  Yeah, this is like 1983, late 1983.

• 2:50Marc Andreessen?

  Eighty-three, eighty-three, right, super famous.

• 2:52Speaker 02

  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." 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 us 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. You see the hello come up on the screen, and I thought, "Wow, this is unbelievable. This is gonna change computing." And like, I still get the goosebumps of just thinking about it. And then he said, "Okay, now show me yours."

• 3:34Speaker 02

  And so like, I 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, and he's like, "This is a piece of shit." And he throws it on the floor.

• 3:50Speaker 02

  And he says, "You're gonna use our mouse, and don't ever think of using a two-button mouse. You're gonna use a one-button mouse." And 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 gonna think about verb noun versus noun verb and 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 gonna make this for a new computer that we're gonna build called the Apple II GS. And we're gonna tell you all about it, but you're gonna make the software for the Apple II. And we're gonna give you a contract." He gives us the contract, and then he comes to visit us in Ann Arbor, Michigan, in our office above a Burger King.

• 4:31Speaker 02

  And the first thing he says is like, "How the hell do you work here?" Like, the smell of burgers comes up the elevator. And you're like, "It was cheap rent. Nobody else wanted a 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 said, "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, "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?

• 5:17Speaker 02

  You have a contract with Apple Computer, and we have a deadline for the Apple to just... 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 promised my parents I would finish college." He's like, "No, you're not finishing college. I will rip..." And I can't say the word. "I will rip this effin' contract up right now if you don't quit college." So I quit the next day.

• 5:43Marc Andreessen?

  Did your parents believe the story?

• 5:45Speaker 02

  I didn't tell them for about eight months.

• 5:46Marc Andreessen?

  Is there...

• 5:47Speaker 02

  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."

• 5:58Marc Andreessen?

  Crazy guy forcing you out of college. 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?

• 6:13Speaker 02

  In 1980.

• 6:14Marc Andreessen?

  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 and start a new 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 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.

• 6:38Speaker 02

  They had a decade of pathetic performance, and then finally went bankrupt.

• 6:42Marc Andreessen?

  Okay, got it. So as long as it was a whimper, not a bang. And so, how did you get from building Mice in your Above the Burger King to buying Activision?

• 6:50Speaker 02

  So, in...

• 6:52Speaker 02

  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. They made the original Atari 2600 games that made the company so successful. Were games like Pitfall and River8 and Kaboom. And these were 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. And 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.

• 7:37Speaker 02

  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.

• 7:44Marc Andreessen?

  Black Monday, they called it.

• 7:45Speaker 02

  Yeah, 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 ex-Atari engineers. And was made, basically, as a video game device.

• 8:23Marc Andreessen?

  It was a big leap forward in graphics performance at the time.

• 8:25Speaker 02

  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.

• 9:06Speaker 02

  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 bed sheets 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.

• 9:44Speaker 02

  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.

• 10:00Marc Andreessen?

  It's a public company. It's a public company with a market capital of $1.6 million.

• 10:03Speaker 02

  Yeah, $1.6 billion. 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, yeah, 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.

• 10:46Speaker 02

  And he's like, well, thank you very much for visiting and nice to meet you. And I said, no, no, 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.

• 11:05Marc Andreessen?

  Literally a quarter of the furniture in the lobby.

• 11:08Speaker 02

  And he didn't return my phone calls for a little while. And then he agreed to have breakfast with me at this consumer electronics show in Las Vegas.

• 11:16Marc Andreessen?

  Obviously, Activision was then 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 Wow. Maybe you could tell us, like, that was a very, very big deal for you at the time. How did that deal come about?

• 11:39Speaker 02

  So it was the spring of 2008, and I had a lot of anxiety about the public markets and...

• 11:46Marc Andreessen?

  The financial crisis is brewing.

• 11:48Speaker 02

  Yeah, and you could see there was a lot of volatility and stability. 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.

• 12:02Marc Andreessen?

  And you guys weren't yet doing the massive multiplayer... You guys weren't yet doing, like, there was this, the big, World of Warcraft had been a big hit at that point.

• 12:09Speaker 02

  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 had 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.

• 12:54Speaker 02

  And I called the guys at Blizzard a bunch of times and said, we should really try and work this out. And they were stuck as a division of Vivendi Games, which was owned by Vivendi.

• 13:03Marc Andreessen?

  Can you maybe describe what Vivendi was at this point?

• 13:06Speaker 02

  It was a big mess.

• 13:08Marc Andreessen?

  It was a former, if I think it's correct, it was a former public utility?

• 13:12Speaker 02

  Well, it was the Water Company of France that this very-

• 13:16Marc Andreessen?

  And by water and other things that flow through pipes.

• 13:19Speaker 02

  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 Lucien is here somewhere. So they had Universal Music, they owned Morocco Telecom, a stake. They owned SFR, which is a French mobile company. They owned Canal Plus.

• 14:00Speaker 02

  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 four billion and then five billion and then six billion and then seven billion. They kept saying no, they liked 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 two 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.

• 14:43Speaker 02

  And, you know, 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, you know, 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.

• 15:28Speaker 02

  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. So we're standing on the top of this roof overlooking the Arc de Triomphe and the Eiffel Tower. And the chairman of Vivendi says to me, you know, Bobby, this building, it would be your home. This would 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 you know, 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.

• 16:13Speaker 02

  And I said, anything is this, anything. And I said, could I build 20 stories of condominiums?

• 16:21Speaker 02

  And he turned white. And I could see the like, oh, my God, who are we getting in business with look?

• 16:26Marc Andreessen?

  I was gonna say, he hadn't been briefed.

• 16:28Speaker 02

  And I said, no, no, Jean, 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.

• 16:48Marc Andreessen?

  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 do the 50, to literally sign up? Because that was a pretty, it worked out well with that. Was it a pretty big risk at the time or not?

• 17:08Speaker 02

  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 gonna do?

• 17:18Marc Andreessen?

  Right.

• 17:19Speaker 02

  And I don't think they're gonna 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 Lucian, 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.

• 18:01Speaker 02

  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.

• 18:42Marc Andreessen?

  Quite the reaction. Yeah, yeah, yeah, exactly.

• 18:44Speaker 02

  So then they had to sell us back their stake.

• 18:47Marc Andreessen?

  Yeah, and then they would completely unwind it ultimately. And I guess, and they completely unwound in their own way, so.

• 18:52Speaker 02

  And everybody did well.

• 18:53Marc Andreessen?

  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.

• 19:03Speaker 02

  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 a $1,000 PC or a $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.

• 19:45Speaker 02

  We have 400 million customers, and anyone in any socioeconomic strata 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.

• 20:27Speaker 02

  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, or 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.

• 21:10Speaker 02

  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

• 21:52Speaker 02

  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 a sport, if not more popular a sport. And that, I think, more than anything is now what we see is driving consumption and engagement and interest and passion and we're just scratching the surface of opportunity."

• 22:20Marc Andreessen?

  Right. So I think, you know, 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 Twitch and Caffeine, one of our companies and so forth. Like, it's, it's, this is going to be, it already is a very big phenomenon. It's a key part of esports is, you know, the ability to fill an arena with people watching other people play video games. Like, that, you know, a few years ago, that just sounded wildly implausible. What was the point? Like, when did you figure that out?

• 22:50Speaker 02

  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.

• 23:33Speaker 02

  There were sponsors, there were professional players making $100,000 or more. So this is amazing phenomenon 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

• 24:16Speaker 02

  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, you know, 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.

• 24:45Marc Andreessen?

  Right. So many of the most successful games that people watch, or that are now actually formally esports, correct me if I'm wrong, they were not originally designed for this. 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 completely 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?

• 25:10Speaker 02

  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

• 25:53Speaker 02

  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 a 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,

• 26:35Speaker 02

  that they will have more of the characteristics of traditional sport.

• 26:39Marc Andreessen?

  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?

• 26:46Speaker 02

  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, they don't have that analog today. And so I don't know that you could see the logical jump to the Olympics.

• 27:12Marc Andreessen?

  Okay. The video game industry seems to have a particularly acute version of a dynamic that you see with, you know, let's just say, consumer properties that aspire an avid fandom. So say 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 for sure see it with video games. So you've got this kind of leading edge, might say, early adopter 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 aren't quite doing what they want. And then when things really go sideways, there can be protests and boycotts 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 thread the needle, as somebody who makes and oversees a lot of this?

• 27:55Marc Andreessen?

  How do you thread 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?

• 28:03Speaker 02

  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. A great TV show is going to be 13 episodes or 22 episodes a season. That'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 and the engagement and the commitment that you're making to that form of media is so different than film and television.

• 28:43Speaker 02

  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, I think some companies run and hide and don't really engage their user base. But I think we have users and players 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.

• 29:14Marc Andreessen?

  Right.

• 29:15Speaker 02

  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, improve, and modify the games, it's a great roadmap for innovation.

• 29:38Marc Andreessen?

  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?

• 29:55Speaker 02

  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 games 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 into something that was going to be a broad appeal, very compelling social experience. And I think the aspiration was build a 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 seasons, so moved from the feature film model

• 30:40Speaker 02

  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.

• 31:14Marc Andreessen?

  And then what is the significance of Pokemon Go? And by the way, for people who don't, I 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?

• 31:30Speaker 02

  Almost three years.

• 31:31Marc Andreessen?

  At least rumor has it, you know, that they have new stuff coming. But it's been a giant hit.

• 31:34Speaker 02

  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, like that moment I was describing to you about the Macintosh, when I first saw the prototype of the Wii, it was like that equivalent goosebump moment. I was in Kyoto and I went into this room and there was a TV. And it wasn't looking 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.

• 32:18Speaker 02

  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 a fish and I pulled the fish out. And I thought that video games would be completely transformed. That nothing had really taken the physical experience in video games to that level.

• 32:40Speaker 02

  And I think that what Pokemon Go did is something very similar, but it created this physical experience that was, 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 we 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.

• 33:13Marc Andreessen?

  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?

• 33:26Speaker 02

  So I would say Call of Duty Black Ops 4, which we just released. The blackout mode of Call of Duty Black Ops 4 is so incredibly fun to play.

• 33:35Marc Andreessen?

  And what is that?

• 33:36Speaker 02

  And addicting.

• 33:37Marc Andreessen?

  What is that mode?

• 33:38Speaker 02

  It's like a PUBG mode. It's like a battle royale.

• 33:40Marc Andreessen?

  Battle royale.

• 33:40Speaker 02

  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 looked 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, has had a lot of fun playing it.

• 34:06Marc Andreessen?

  Yeah, fantastic. And I think we have party favors?

• 34:08Speaker 02

  We brought Call of Duty for everybody.

• 34:09Marc Andreessen?

  Call of Duty. So I believe everybody's going to have a copy of Call of Duty. Bobby, thank you so much.

• 34:12Speaker 02

  Mark, thank you very much.