YouSaid · the spoken record

Joost van Dreunen

lines on the record: 61
first: 2021-01-26
most recent: 2021-01-26
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Started to think about what to do. I always try to honor that idea of what's best for you. And I think it's in building businesses or talking to my students, going through the pandemic over the last semester. I try to kind of channel that, pay that forward by saying, let me just empathize with your circumstance a little bit and like, how can we be together? But that was really such a helpful, beautiful person to help, you know, in that moment. So that was one of the kindest things back then, which was meaningful to me.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“My company started really with this wild idea because I wasn't sure what to do. I had just come out of grad school and I had sort of lost my own way. The thing is that you grow up in the world where you end up thinking about how to be in that world. So you start a business, do you take a job? Where do you go from here? One of the kindest things that anyone's ever done for me was a doctor at Columbia University. So I was diagnosed in 2007 with cancer. It was her, I won't say her name because I don't want to embarrass her, but she was the one who said, look, you need to go get this checked out and you need to upgrade your insurance. And if it's nothing, then you'll spend a little extra money. If it's something, then you're going to save yourself a whole rig and roll. So I went through a whole medical thing for like a year, cost hundreds of thousands of dollars, which I didn't pay because she told me to think about this. And it wasn't so much about saving the money, but it was about someone who's like, let me look out for you. And so since then, as I was.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Industries, it's all about the fanfare and the fleshy lights. And oh, but did Kanye wear it yesterday? And like, oh, let's talk. Who cares? There's no TMZ for games. So that absence, I think, of ego in everything that you do. And I said this also as an entrepreneur. If you're able to let that go, if you're able to just focus on the problem, if you're able to just to focus on building cool experiences, I think long term is far more interesting than your 50 minutes of fame. And I think from a financial standpoint, it's just much more interesting long term to invest in companies like that. So that's how I would personally always evaluate people. You just look at the management team and the seniority and their ability to get shit done, but really just the cadence of their ego. So that would be my lesson. If you are in an under in a different entertainment business, if you could just tone it down a little bit and actually just do your job as a musician and do your job as a marketing manager for a film. I think that that's one of the lessons I would take from the game industry.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's built on people being extroverted and having a story to tell or having an idea to transmit and communicate to other people. They don't really do it for the sake of their own celebration. They don't really want to necessarily recognize and stood out into a crowd. And so the games industry culturally and individually, as I experience it, have always been sort of the quiet kid in the back of the room tinkering away. And it has retained a lot of that character. So if you see a Tim Sweeney, so I met him briefly two years ago at E3. He looks like the programmer that's been sitting in the corner in the windowless office for the last 20 years, right? He wears a cargo pants because the big backpack, dorky looking fellow, that guy's a billionaire. And he has a vision for the world. And he's been doing it since he was a kid too. And I think he personifies in so many ways sort of what really makes this industry tick is that there is this modest genius that operates it behind the scenes. Whereas so many other entertainments.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say something like this. The games industry has always been on the fringes of entertainment. No one cared. It was for the longest time a category of entertainment that was bad. Politicians would use it to demonize behavior and say, look at all these violence coming from these games, blah, blah, blah. And so the games industry has always been on its back foot. If you look at it culturally, it's starting to change a little bit now. But for as long as I've been in the industry, which is now coming up in 20 years, unlike Hollywood and unlike the music industry, there's not a lot of red carpet events just from a personality point of view. The games industry at the top, and I talk to people that have been part of like these billion dollar franchises as much as I do to indies and starting designers through my class at NYU, what they all have in common is that they check their ego at the door. It's such a cliche in something, but from a culture industry, for an industry that's by its very nature or something.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“We don't quite understand, but it will have meaning to them in the same way that what we value made no sense to our parents. They never looked at gaming as something meaningful, yet here we are $160 billion later. For all those reasons, I think some of this is on a longer timeline than others. But those would be four areas where I'd look at it and say, well, whoever manages to incorporate those new phenomenas, new behaviors into their business model, and create interesting content around them, those are going to be very, very valuable companies soon enough.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“And the creator, the publisher of those cards, they control that economy. They tell you exactly how many rares. And so you have the Black Lotus cards imagine gathering or spectral tigers and world of warcraft. They're worth thousands of dollars and they can be traded against. So the equivalent of that in a digital environment requires something new. And so you start to see the early shape of crypto-based gaming, where now we have basically a financial system that isn't encumbered by international taxes and exchange rates. And you and I can trade against each other on this card or this asset that I've earned and grinded my way through in this game. I can sell it to you and we can trade against it. And so I think that that's going to be on the horizon. So that's still two to five years out. But that's a space where if you can somehow take that mechanic and make it work for you, I think that that could be very interesting down a lot. Because ultimately whether we believe it or not, and this might be our kids' children, it might be behavior.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“And frivolous. When I started my business, it was about explaining people the virtues of virtual items and microtransactions. And why would you spend real money on in-game currency to buy a purple sword to go with your gold horse to go on this whatever this timed raid? It made no sense to a lot of people. Of course, that is naive. I'm sure you haven't too, but if you've ever played Magic the Gathering or Pokemon the card games, each of those has value. Those cards have”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the production process and the development of the content that keeps everybody else in the ecosystem. I think part of the success of Minecraft was that everybody's creating stuff for everybody else in there and there's so much to do and see and play. There's no way that a conventional creative firm could produce the same amount of digital assets and content as its own user base. So can you figure out a way to set that up so that everybody benefits from it? And I think Roblox will be the first. They haven't quite figured out the economics. I value 30 billion, but there are 200 million in the whole annually. Like, all right, let's hope that works out. And I'm sure that they will. But it would be more credible if they were making lots of profit just yet. So that's the third one. And then the fourth one, and I think that's one, is the furthest out. But if you think about how games really have allowed people to attach meaning and value to digital assets, we now do things online that people 10 years ago thought were meaningless.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Where you could cool two beers and then KFC had a chicken fryer console. It always feels kind of broy and like everybody had a good time high fiving each other. Is that really going to move the needle? Probably not. But it's not just the income. It's like Candy Crush, Zynga that are trying to explore advertising more aggressively. I think you will very soon see the game equivalent of Soap series where you just have a category of TPG companies that are all going to pull their money and say we're going to make games of this nature, this category, this genre. And everybody knows that it's funded by automotive or people that make noodles or whatever. So advertising will be second. The third one will be the Roblox category of user generated content. Can you design a secure, safe, creative space for players so that you don't have to acquire new ones all the time, but that you retain them longer? And also they then take care of at least”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“People in free to play that don't spend any money ever, nor will they, and that's fine, but they're going to have to live with advertising. And so all of money dedicated to the $70 billion in TV broadcast in the US and the 300 billion or so that people spend on advertising worldwide, I should know that exactly because I was at Nielsen, I suppose. But all of those advertisers are desperately looking for pockets and places where they can reach younger consumers. If you look at sports, sports is doing fine, but the average age of baseball fans and football fans is not going down. So for advertisers to look for younger audiences that are still consumers, they can influence in their purchase behavior. Sports and traditional media aren't really the place to go anymore. And so they try to get into games. And so because of the size of that business and the interest in that, you're going to see advertising appearing all over the place. We already saw Bud Light did a cooler.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“For novel business models, business innovations. And if we purely look at how games make money, and think of four of them, so it starts with subscription. If you look at the success of Game Pass with 16, 70 million subscribers nowadays, you have EA Play, you have Ubisoft Plus. That's just the games category. Of course, Ubisoft calls it that way because of the success of Disney+, which is blowing up in its own. So this move towards subscriptions is something that works really well for consumers. They get this buffet of content. Everybody gets the model now. It works cross-platform, and it works really well for game companies, particularly the publicly traded ones, because everybody loves recurrent revenue on their books as opposed to transaction-based revenue. The valuations for those companies are much higher. Access to capital is better. Everybody wins. And so subscription is one. And anybody diving into that has a good time. The second one, because of the size of the audience, you can now also do indirect revenue. So there's a huge swath of”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Mobile was driven a lot by technology. It was a new device category that was very disruptive of existing devices. So I was basically asking me, what's the new iPhone? It's like, yeah, to answer your question. What for me was interesting about the iPhone wasn't the new device or the hardware specs. It was really the business model that came with it. I always look at market saying, what is the competitive advantage of a business model? It is because of the way that you do things and combine components of the business that you are better than everybody else, not because you also have a website or a mobile game or whatever, a custom controller. So I would look for the business models. I looked at it from a product perspective and, okay, we're all selling boxes to retail. Then we move into a service component where it's free to play and we can do all that. And that's cool. Games are now mainstream, which means that they have 3 billion people worldwide as an addressable audience, which allows”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“So you have to kind of wonder as an investor, like sometimes I hear a story from a creative, I love the vision, but that is so far out. Like no one will get it. I don't think being creative is a unique virtue. It's really about do you have a rationalized model around it that makes sense? And so PUBG came into a lot of success and then Epic just ran with it. I think so many times you see companies run into a success, but then they don't know what to do next to capture the lightning in a bottle again. So that's where I said as a vestige.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“have a plan that goes a little further than we have a cool game around this because cloning is a real problem for a title like among us too you see lots of newcomers are there if you remember fortnite was based on player on no battlegrounds pubg basically created the category in and of its own right but it charged 30 bucks and it was really photorealistic with shooters and guns and all stuff and then fortnite comes around and it's this goofy circus but it's really smooth and it's free epic took the model took the category and they just ran with it and so that's a moment to invest i was told when i came to us as an expression pioneers are the people with the arrows in their back”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because of that, they've moved so slow in that new category that allowed newcomers to take most of the value out of it. As an investor, I always look for moments where that's happening, where the incumbents are just sort of sitting on something but not acting on it. And then you have these newcomers creating and you see the numbers go up. And I'm talking about healthy numbers. There is a phenomenal way you could say, well, what about fall guys or among us? I like those games. I think that they're great. I play them for more hours than I should admit. But at the same time, it's like, well, where does that business go after this? So they're going to sell me plushies. Is there going to be among us too? And will I care about this? Probably not. They tried and people said, no thanks. It's not a flash in the pan, but you have to wonder, do we still care about Among Us next year? What's the longevity here? So I'm always curious to look at the businesses that are at the cusp of something that's about to go big in terms of it's a space, no apex predators want to move into.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“And a software languages that you needed to go through. And so just from a development, it just didn't have any margin in it. They saw this fancy new phone and they see Apple's trying to get their piece.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“A very irrational investor, I should say. I also build a business around games, which no one thought was a good idea. And in retrospect, it wasn't. It paid off. We had a great exit. But for an entertainment industry, I think rationalization of the business is always in short supply, which is to say you can take a piece of paper and append to it and say like, well, what actually works here? So my angle in all this is I like it when companies are entering a new space that is uncluttered with natural apex predators. So the reason mobile did so well is because all of the conventional publishers that held all the IP and all of the creative development power, they didn't think that mobile was going to be any big deal. I spoke with them. I said to Ubisoft WhatsApp, they're like, we're going to sit and wait. Because to them, before the iPhone, mobile was a shit show because it was of the mechanics.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“So that no longer are we simply making cool games, launching them with a lot of fanfare and shipping a box to a consumer, now it becomes this ecosystem of creativity. And you see that really in the Epic Games, the Robloxes. And you have to ask where legacy publishers are with this. What's Microsoft going to do about this? What's EA going to do about this?”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Really seasoned people. They know how to get things done. And they have this beautiful model of not just having the game, but also the engine and of course the backbone. And so they have this flywheel that they do really well. And it speaks to the imagination. And so all it takes is a pandemic to then really, of course, jump into the front of the row. What it's going to do is going to put user generated content on the map. Because of Roblox, every other company is going to be asked, what are you doing about user-based creativity? Like, how are you going to facilitate that process? And can people monetize that? Can they make money off of this? How do you navigate the space? So it's not so much that you have a novel idea and you were successful in your own right, but you shift the category entirely. And I think that that's what Roblox is doing. I think that's what Epic is doing, which relies not just on its third-party relationships with the Epic Game Store, but they also have the Unreal engine, which they then, of course, sell to Hollywood with having the Mandalorian shot in Unreal Engine 4. All of these aspects make”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Chinese title that looks and feels like Zelda Breath of the Wild, which is like sort of the high bar for Nintendo's creativity, but it's free to play. It's not 60 bucks. I don't have to buy a dedicated device for it. It's on my phone. And it's this open world universe. So there's a lot of changes happening where the incumbents are being outcompeted and outmaneuvered by newcomers. If we look back at the North American market, what's really interesting now, you have Epic and we have Roblox, for instance. Those are the two major ones that have really manifested themselves in an interesting way in that they don't necessarily follow the conventional way of making games. They offer so much more in terms of how they engage their user base and how they make money. You see this now with investment announcement, the series H for Roblox yesterday. Value that 29.5 billion dollars good for them, you know, and I know a bunch of people on the management team.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Not the case because the switch is doing really well, and it's not just doing well in its traditional conventional markets, it's also doing well in China and all these other markets. So they've been able to reinvent themselves and penetrate new market areas. Nobody saw that coming. So the legacy companies in the world, they do really well. At the same time, you have a lot of these newcomers like the 10 cents I mentioned. And the 10 cents universe, of course, benefits greatly from having made a few smart, although high-priced acquisitions in the form of supercell in terms of riot games and a bunch of others, where they just have a lot of fingers and a lot of pies. And that's just the fingers that we know about. This is spider crawl their way across the universe looking for content and creativity. Then you have some newcomers in Chinese market. So Myoho with Genshin Impact, for instance, conventionally you would think of Blockbuster titles and AAA productions coming from North America, from Japan. And now suddenly you have a free-to-play Chinese.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“The Chinese companies 20 years ago it was the Japanese companies, Nintendo, Sony, and then of course the Konamis, Capcoms, Bandai Nemco's, and so on that would run the show. 10 years ago, then you see the American companies really drive a lot of the value and take up more market share with EA, Activision, and so on. And then in the present day, it's mostly the Chinese companies, 10Cent, NetEs. The big deciders today are the ones that have the IP in the capital. And so Nintendo is a really good example of that. They've blown everybody away with their ability to not so much reinvent themselves, but just to almost be impervious to market cycles. The Wii was a huge hit. They sold 140 million units of the Wii. And then the Wii U was the opposite, that they sold one tenth of that, right? They sold 14 million units of the thing. And nobody cared for it. That was a crappy device. And that was the point when everybody thought Nintendo's done, Nintendo is Toast. And it ends up being...”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“The movers and shakers are companies like Epic Games, obviously, that has a lot to do, of course, with the amount of money that Tencent pumps into the ecosystem. But surprisingly, if you take sort of the clear-cut business theory, it doesn't really apply to a lot of this in that you think that a lot of these businesses should have been out of business by now. You think that GameStop should have been gone. You think that large publishers like EA would have been out competed by Tencent by now. But somehow they're all still here and they're all making a mint. And I think that that has everything to do with the explosive growth about the industry. And so all the boats went up. There was some consolidation. There was some shakeout where companies like Atari, they tried to, but they never quite regained their former glory. But most of the companies that were there 10 years ago are still here. They just take on a different position in the market. And I think one of the notable things is that today the market is no longer governed by Japanese and American companies.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Past viewing, you're really talking about online communities. And I think Twitch is a little too public and email is way too private. These listsers. But having curated a group of humans through work or centered around a hobby or interest that you share, I think it'd be a very effective way to just have a good time with others. And what Discord does so well is it integrates with all these other phenomena like watching online, talking online, exchanging videos, playing together. I'm not surprised that they've overvalued at like $7 billion last month because they are effectively a social connective tissue between all of these online activities.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Phenomena of watching other people play video games is very, very common. Twitch then make that something that was online. And now suddenly we have interesting people in the same way that you would have a cool radio personality talk between cool songs. So that's where I think Twitch was a very interesting acquisition by Amazon. They purchased them in 2013, 14 for like a billion dollars, a little shy of a billion dollars. Right from under the nose of Google. And live streaming, of course, has this additional component, which I think YouTube has overlooked for a long time, watching simultaneously with other people. So as a Dutchman stranded in New York now for 20 years, the one thing that I like about the World Cup is that I know that all my other Dutch friends are watching the same game at the same time, watching it. That's what Twitch kind of gives you to that sort of magical experience of watching at the same time with other people. The other firm you mentioned, Discord, I think once you get...”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's too dystopian. That's not actually what happens. Twitch I thought was interesting in that it would create a live feed. And if you are a gamer from an early age on ideally with siblings, then you instantly understand how common and normal and organic it is to watch somebody else play. I was the older brother, so I would then troubleshoot certain levels because my kid brother couldn't solve them. And we would have house rules about every other life and every other level, you'd have to hand over the controller. That was just a house rule. So finish the level, then it's the other person's turn and so on. As you progress through life, then you go to college. I had this one friend. He was an animator. He was really into horror games. I was all into hanging out and playing games together. I can't play that stuff, man. I'm too feeble for this. So I would basically watch him play Silent Hill for hours on end. It was just like psychological terror that happens. It's awful. But it's a really fun experience as long as I don't have to drive.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“The idea that you would want to see other people online doing anything seemed ridiculous 10 years ago. Now it seems normal. I have a seven-year-old. He doesn't know any better. He practically tells me to like and subscribe when I put him to bed at night. And so, you know, it's like close the door.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's when things really start to gel. And so League of Legends, for instance, if you follow that example, they never really are aggressive about microtransactions and never really drive people to the point where they make them spend money or they get stuck. Well, what they do is they say, well, here are all your friends. And here is a really thriving community around it. We should have esports where you can come and see this tournament of these really great players and share with other people that also like the things that you like and celebrate together the release of this new character, blah, blah, blah. Games stop being this box thing and they start being these digital on and offline experiences that you share with other people. So free to play in many ways and for all of its ills, it also had a lot of benefits down the line as they moved through that model.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“As it costs me more to get people into my game, I'm going to instruct my designers to be more aggressive with the bottlenecks to encourage spending. You don't want to wait for your mom to come online on Facebook and help you hurt your purple cows. Cool. Give me some money. And so it goes. And so they start to really squeeze people, which is, of course, a turnoff. It gives a very different experience than if you have this open meadow of opportunity. So in that context, you start to see a lot of friction around free-to-play mechanics becoming really aggressive. And that was the dog whistle for a lot of the legacy poppers who immediately said, see, they're only about getting paid. And this is a very hollow, shallow way of doing business. This is not about arts and culture and creating things. This is really about squeezing dollars out of old ladies. And to some degree, that was effectively the model. What makes this all make sense is network effect. As you start building a social layer into these games,”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“These ridiculous purchases. And so some of these companies early on, they were very dependent on just like a handful of ridiculous customers, like just the profile of these people alone. You wouldn't invest in it because if one of those people gets hit by a bus, half your business is gone. So that's not something that you want to be relying on. But free to play really became, is a slow drip. Free to play was, of course, started very quickly to model the casino mechanics of, well, who are the big spenders and can we monetize them aggressively and how long can we keep them at the table kind of thing? But you realize that it's really about retention as the cost of acquisition goes up in free to play because it is all the same. All these games are free. Everybody has now accepted this zero dollar price point as a result. There's just endless amount of marketing going on to all get users at the top of the funnel and then try to convert them onto the next to the next. It's proven to be increasingly difficult. Detention really comes down to this.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Initially, you see companies that are very reliant on a handful of customers that spend by far the most money. I'm not kidding when I say I used to be the data business around this, right? So I'd have these data providers. And I would call them sometimes saying, why does it say 50,000 euros on this line item here? Why do we go through these regions? That seems like an anomaly. It's like, oh no, that is one of our saudy customers. And he ordered a custom sword for his character in his game.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Digital native companies, those became the ones that won that round where one of Val's biggest titles is Team Fortress. Team Fortress originally was 30 bucks and then they gave it away for free to play. They said, don't pay us for the game, but if you want to buy a funny hat for your character, then you can give us money. And it just blew the roof off of that thing right away. And so they learned very quickly that free to play is the best way to monetize because it gives a lot of choice to the user. Conventional publishers get stuck on their product-based business and the revenue model that goes with it. free to play open the door for a lot of newcomers to take market share.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Really weird, wonky, and almost blasphemy to how they had been doing things. And then, of course, you see things like Supercell and you see companies like Tencent and they become the biggest companies out there with these free-to-play mechanics, like League of Legends, to be clear. So free-to-play does not mean I spent money, therefore you lose. It's mostly vanity items and visual anesthetic upgrades. You can have some games where you could spend some money and I get a higher percentage hit rate. So in like world of tanks, you can buy golden bullets that give me a bonus, but none of it is I spend, I win. And I think for that reason, it's something that's always overlooked. But it goes very much against the logic of having to spend $100, $200, $300 million to be successful. So that's where free-to-play kind of sits. It became this oddball phenomenon for legacy publishers. And because of that, of course, the winners in that scenario, the new generation of”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Mindset or the management team that puts something like that together for them to think about these tiny screens in your pocket that have these 99 cents or these free games that makes no sense at all. Which to me echoes that same sentiment that you would see in Hollywood when the TV became very popular when it started to popularize throughout the US. filmmakers and film producers was like, this is crap. Look at this trash. Low resolution black and white television. This is not the form factor that would facilitate the spectacle that we're used to making. It doesn't match the economics that we have today. TV in its early phase was almost offensive to filmmakers. Nowadays, people can't wait to take Netflix money to make amazing things. But back then, that new form factor, that new format was perpendicular to how people were used to doing things. Free-to-play and gaming was sort of the same for legacy publishers. They thought of”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the free to play model comes in perpendicular to how things have been going and functioned up until that point. You hear the CEOs of these big public traded companies take two, like Star Zelni going like, yeah, free to play, it's not for us. You can't fault take two, like take two just broke 200 bucks a share the other day. When I started my business, they were trading at $9 a share. So it's not as if take two's been suffering. From a management perspective, this is a company and it's a legacy publishers as I think of them. They're used to sort of these Hollywood economics where you just spend a lot of capital up front, Grand Theft Auto V, they spend $260 million, roughly spit equally between development and marketing. That's a huge amount of money, right? A quarter billion dollars to get this thing out. And of course, it makes a billion within three days after launch. Those are the economics of a blockbuster game title on console.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Three of the categories. They continue to do really well up until present day where the console business today off the top of my head is about $20 billion in terms of software sales annually. The PC market is $35 billion. And then the remainder is about $85 billion is mobile. And that's just a software business. And there's also the hardware components to it. But if we purely look at content, the industry just explodes from $30 billion in the early 2000s to about $150, $175 today. It's massive.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“At nine, when Apple turns the key on free to play monetization. And that's the moment when they kind of take the scaffolding down and you can go bananas. So there's no ceiling to what people can spend. Free-to-play monetization becomes this breakout moment for the industry because up until then in a product-based business, you end up spending 60 bucks or five bucks or 99 cents up front and then you get to play the game. In a free-to-play model, you can play as much as you like. And if you want to spend money cool, that's up to you. But you get to play anyway. So there's a lot of value, a lot of content for users there. So now all of a sudden you have this hockey stick in terms of revenue from the mobile space that crashes into console and PC. And so naturally around that time, you hear a lot about the death of the console because, oh, it's so close to the console. The console is going to go die now. And the PC, of course, is the same. Like, oh, well, that's such a fringe device, blah, blah, blah. Turns out all three of them grow.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“And then in 2007, Apple launches the iPhone, and the iPhone really shifts the mobile space. And then Apple comes in and they revolutionize the model rather than having to build the same game for 400 different handsets for AT&T, you now have to only make one version of the game that goes into the hands of all these people everywhere that are just spending $600 or $1,000 on their new iPhones and they're eager to try out new content. So the iPhone revolutionizes it because it becomes this must-have fancy device. At the same time, of course, no one has ever tried to use a touchscreen interface. So a game like Angry Birds, in addition to its brilliant design and its incredible creative marketing effort, it's also a game that teaches you how to swipe. For Apple, it makes sense to foreground a game that teaches people how to actually use the thing. But that's not really when it takes off. Mobile gaming takes off not in 2007, it takes off in 2007.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“And work out bugs, glitches, add content, and so on. They had a more fluid idea of what gaming could be like. And as you release updates and software changes, it improves the user experience. So in 2004, they launched this and then very quickly realized we should sell third-party content as well. We need to have something that other people can use as well. So for that reason, you start to see the tides turn a little bit. Digitalization then allows PC to kind of regain some of its glory. And so today, PC is the second largest category, bigger than console nowadays. The way to think about it in 2021 terms is that mobile, which I'll get to in a second, is let's say if that one is $4 in terms of total market share, then the PC is about $2 and console is $1. So it's a 421 ratio between the three. So as the industry shifts more towards digitalization, PC then regains all this momentum.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“The three major categories are PC console mobile. So PC was of course really where a lot of things started, but that ended very quickly because the platform is open. There's a lot of components to it. Piracy is, of course, a problem in the 70s, 80s, 90s, and so on. So nobody wants to invest all this money into stuff that other people are just going to go out and steal, or at least that's how they thought of the world. So very quickly, the publishers all went with consoles because of its steady hardware features. There's no tricks. There's no changing hardware specs. You don't have to build 15 versions of the same game. Around 2000, you see basically a market that's 95% console and 5% PC games. So that carries on for a few years until 2004, a company called Valve, they launched a digital platform called Steam, which originally was really so that they could send updates for their own games to people over the internet.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Have been. For that reason, I think GameStop has been able to stumble forward so far. I think maybe now as a result of COVID and Corona that you have point where it's like, does it still hold water? Is that then the final nail in the coffin? And if it is, it wouldn't be because of COVID, but I think COVID is then finally laid bare some of their weaknesses. GameStop used to be this communal point, but I think it's lost a lot of that shine in the last few years.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“But really, it's a fundamental shift. And if you don't believe that for your own segment, well, what's going on with tower records? If you recall back in the day, that was like the dopest music store in the world. You had musicians and rock stars all doing cocaine side by side with the customers and party all day, talk about music. That was the place to be, right? And then it became this massive franchise and then the CD came around and it sort of stuck around and then iTunes and Napster basically murdered that whole business in collusion with the actual owners because they refused to acknowledge it. Like why isn't there a tower records digital distribution point, right? By the time you get to Spotify, it's a distant memory. So GameStop is always been one foot in the grave in that sense because they haven't really been able to do the same thing. But I think because they are so good at what they do in the conventional games market and because the games market has been never really scrutinized to the same degree of music and film and video.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“But in their sort of tone deaf universe, for them, that's being part of on the front end of the digitalization of the industry. If we put it in business school terms, it's the mental inertia of management. They just don't have it. The sort of mental model that they hold on to and refuse to surrender. That's one of the reasons I've been kind of bearish on them this whole time, because it's like, come on, get with the program. You see it happen around you. So they tried, they made some efforts, they made a few acquisitions over the years. They bought a digital distribution platform. And so they try to participate, but they mostly have been staying the course that they've had for the decade before that. So that's one of the components that I think have been missing out on. And then GameStop in and of itself, digitalization is affecting all aspects of the conventional supply chain, right? In a product-based business, it is so tempting to think of digital as sort of accretive revenue saying, oh, it's extra money. That's great.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“I spent the last five years predicting the end of GameStop, either by way of just bankruptcy or by acquisition by Amazon. And the reason is fundamentally that leadership at GameStop has been incapable of acknowledging the shift to digital. Retail people are diehard, hardcore. If I just told you about how great they were with all these front-of-the-house aspects, that's their world, right? They're a dollar per square footage type of metric. To them, digital is like this weird thing that doesn't make sense in their universe to illustrate that they describe digital in their earnings reports as basically prepaid game cards. Oh, digital is an opportunity for us. It's not a threat. Digital distribution is going to be totally fine because we're going to sell in the store these codes for money and then we'll just make money that way. It's like, no, dude, they're going to start selling your entire game through these new channels and they're not going to come to the store, not for the games or your prepaid game cards.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Have two kinds of books. What's the value of a game that's been sold three times already? And then where is it stored? Is it in Arkansas? Is it in Pittsburgh? Like, where do you keep this stuff? So they have a dedicated team of 400 people. And that's all they do is they use game sales. They just manage that inventory and do the logistics and shipping it around, which is fascinating.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“Which you drive off the lot, and it's worth less, but it's also being used and has a lot of moving parts. The game at the beginning of a hardware cycle is the same quality as the game is at the end of the hardware cycle. So in other words, they were then able to resell the same game six times on average, blockbuster titles, have a resale value six times for GameStop. And what it does is drive traffic. And of course, it generates a lot of revenue. It also creates a lot of friction with the publishers who don't get paid out of the other five transactions. They only get paid the first time. So that never really set well with them. But for GameStop, it meant that a quarter of their revenues annually comes from used game sales. They really managed to do that by having a dedicated staff for it. And that's something that the best buyers and targets of the world, they just can't follow. They tried. They tried repeatedly, but they just can't follow that effort. And that's what differentiates GameStop and led to its ultimate success.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's genius. And then the third component really that drove their success, and to this day, I think, is one of their biggest draws is used game cells. After you finish a product game, conventional model, you play a game and you'd solve all the levels and solve all the puzzles and you rescue the princess and then that's kind of dumb. So the replay value of a product-based game tends to be limited as opposed to say online games that you can play forever and ever. So you want to trade them in. finished assassin's creed it sits there it's collecting dust and so you can go and then use it for in-store credit and it's never a lot you could have these very significant emotional experiences with a game for 100 hours and then you go to game stop and they'll give you five bucks for it but it's five bucks and now i'm halfway to the next game their ability to do that wasn't so much because they're trying to be nice to people of course so this doesn't really depreciate in quality right a game is a game is a game it's not like a car”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“They really invested into their staff to make them differentiated from more general retail stores. Another component in what they do, of course, is they know their audience well. So they have all these loyalty programs, but they also do really clever things like they will always have a ramp. And I don't know about you, Patrick, but I always wonders, like, why are they so good about having the ability to have wheelchairs in here? You could see them. It's like, I thought that was so nice. It's the only retail store that has consistent ramps everywhere. And I realized now that it was possibly also for wheelchairs, but the way it was told to me was primarily for people with strollers because they figured out that 14-year-old boys, they don't have any money, but mom has money. Mom is pushing a stroller. And she needs to be able to maneuver through the store or she's never going to come here. So the aisles in the GameStop are also very wide, basically allow for stroller traffic to maneuver easily. That sort of focus on their customer base and who's actually in the store.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source
“On its customer base, it became a specialty retailer. This is a story if you ever talk to GameStop people or former GameStop people, they will always say the same thing. It's like if you go to Walmart and you want to get Grand Theft Auto or a New Zealand game, Samanta from Houseware has to go get the key and walk you over to this glass cabin and is it this one? Is it that one? So it's a very different purchasing experience than you get in a GameStop. For my class at NYU, I will challenge my students with the same exercise, which is go to a GameStop and see if you can outmaneuver and outwit one of the clerks on their knowledge of a title, a franchise, the latest edition of XYZ. And you'll find that the clerks are really well read. They know the space really, but they know all the games. And so that's a very different experience, especially for a category like games, which is, of course, is a bit of a fringe form of entertainment at the time, 80s and 90s. You need someone to help you navigate the space.”
2021-01-26 · Invest Like the Best · Joost van Dreunen – Unlocking Value in Gaming – [Invest Like the Best, EP.210] · IDENTIFIED FROM THE TRANSCRIPT · source