The EA "LBO"
Gamecraft
In this Special Edition of the GameCraft podcast, Mitch and Blake discuss the $55 billion leveraged buy-out of Electronic Arts by the Private Investment Fund of Saudi Arabia, Siliver Lake Partners, and Affinity Partners -- the largest LBO in US history, and the second largest transaction in the history of the video game business after Microsoft's $69 billion acquisition of Activision. They discuss the deal itself (and how to properly characterize it), some of its immediate implications, and why Mitch's take on the possibilities created by EA going private went from excitement to disappointment...
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The Sum of the Parts (Ep. 24)
Gamecraft
Mitch and Blake explore the role of consolidation -- primarily through mergers and acquistions -- in building some of the biggest and most durable companies in gaming. They begin with a discussion of the four major strategic uses of mergers and acquisitions: economies of scale, entry into new markets, control of talent and intellectual property, and new technologies. They provide many examples along the way. Mitch argues that M&A is so important to the business that it's actually difficult to avoid ending up on either side of that equation, as an acquirer or as a target of...
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AI as a Platform (Ep. 23)
Gamecraft
Last season, Mitch and Blake discussed the implications of new Large Language Model Artificial Intelligence in games. In this episode, they return to the topic, this time focusing on games that are using AI as a platform -- meaning, the games are predicated on the use of LLMs to manage gameplay in some way. After introducing the central ideas, they list a series of games they have encountered that make use of these new technologies, from relatively modest text-based adventure and role playing games, to more sophisticated games involving dialog with digital characters, dynamic narratives, and...
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Hasbro and Lego (Ep. 22)
Gamecraft
Mitch and Blake look at two of the largest toy companies in the world, Hasbro and Lego, and discuss their divergent but ultimately very successful forays into the games business as licensors of intellectual property. Your hosts discuss how both Hasbro and Lego tried to enter the games business directly as developers and publishers of digital games in the late 1990s, how they had very different experiences of success and failure, and how both decided to exit the business in the early 2000s only to return as licensors rather than publishers later in that decade. Mitch tells the story about why...
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The Venture Deadpool (Ep. 21)
Gamecraft
Mitch and Blake address the unpleasant topic of how and why venture-backed games companies fail. They look first at the nature of venture financing and the inherent differences between venture and publisher money. This leads to a conversation about how developers who were used to working with publishers treated venture capital like production financing as opposed to company financing, and why that distinction matters. They then turn to the flawed strategies and tactics of gaming funds and investors, who tried to make up for their lack of judgment and taste by placing many bets on startup...
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China (Ep. 20)
Gamecraft
Mitch and Blake look at the current state of the vitally important Chinese gaming market, on the precipice of a bitter trade war resulting from the Trump tariffs. They review the history of the games business in China, discuss the reasons China is so competitive in the global gaming market, and look at how some of the ways the Chinese market diverged from other markets influenced the strategies of Chinese game companies. In particular, they look at how China's relatively late entry into the games business proved to be a benefit, by allowing them to skip the packaged goods era and therefore...
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Valve (Ep. 19)
Gamecraft
Mitch and Blake take an in-depth look at one of the most important companies in the global gaming business: Valve. They trace the company's origin as the developer of first-person shooter Half Life, their use of the Quake engine and the benefits Valve derived from their relationship with id, and their development and deployment of the Steam platform. They explain how Valve used content like Half Life, Counter-Strike, Team Fortress, and other games to aggregate audiences on Steam, and how they used those audiences as the bedrock of their move to platform-based publishing on Steam. They discuss...
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The Mobile Gaming Duopoly (Ep. 18)
Gamecraft
Mitch and Blake discuss the mobile duopoly in which Apple and Google exert extraordinary power by tying their app stores to hardware and software platforms. They warn that the inflexible and expensive distribution systems on iOS and Android could be models for future PC and console distribution systems. They briefly review the history of mobile distribution and mobile technology innovation from the late 90's to the present, and what that development meant for content on the platforms. They discuss the similarities between the JAMDAT and Scopely content portfolio strategies as responses to...
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Cycles & Survival (Ep. 17)
Gamecraft
Mitch and Blake kick off Season 3 of the podcast with a high-level look at the current moment in the video game business, critiquing both the idea that the business is cyclical and we are in a downward phase of the cycle (and the naïve notion of "survive 'till '25"), as well as the idea that the business has simply matured, suggesting we are in a new phase of low growth and consolidation. Instead, they propose a framework for thinking about the games business that argues for the continuous interplay of three innovation forces: content, distribution, and technology. They outline how each of...
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Artificial Intelligence (Ep. 16)
Gamecraft
In their final episode of Season 2, Mitch and Blake take on the complex and highly speculative topic of the impact of recent improvements in artificial intelligence on the games business. Your hosts acknowledge that the sector is moving so quickly that this episode could be obsolete by the time it airs, and warn that it's difficult at this early moment to look too far into the future. Mitch offers a loose framework for thinking about AI in game production, mapping this framework to specific areas of game creation and publishing that could be effected by AI. They discuss in particular the...
info_outlineMitch and Blake address the unpleasant topic of how and why venture-backed games companies fail.
They look first at the nature of venture financing and the inherent differences between venture and publisher money. This leads to a conversation about how developers who were used to working with publishers treated venture capital like production financing as opposed to company financing, and why that distinction matters.
They then turn to the flawed strategies and tactics of gaming funds and investors, who tried to make up for their lack of judgment and taste by placing many bets on startup studios. They address several other factors that made games investing tricky for venture capitalists who often had little experience managing creative businesses and lack a basic understanding of the peculiarities of game production.
Mitch and Blake look at reasons why venture backed companies fail, and why catastrophic failure appears to be more common among venture-backed games companies than other software companies. They discuss the concept of the "naked B," why growth rounds are rare in games companies, and why games companies are uniquely difficult for conventional venture capitalists to evaluate.
They conclude with a look at some examples of companies that failed to return capital to investors -- in some cases very significant amounts of capital -- and discuss a few companies that appear to be in danger of following suit. They explain why the cumulative effect of these failures is one of the factors behind the current difficulties game companies experience raising money from venture capitalists.
[Ed.: since recording this episode, one of the companies in the deadpool, Elodie Games, has shut down.]