Hello, friends.
Time for part two. Might make a trilogy. Or an interconnected blog metaverse. They’re hot right now.
In the first part, I went through why we wanted to found a game company that focused on advancing game design versus some of the alternatives. The goal was clear, but the path had some twists.
The pitching process was a grisly Zoom gauntlet. In a decent chunk of those meetings, we were pushed to align our narrative with a more investable one — to de-emphasize the role of design in what we are doing in favor of things like business model shifts or platform shifts. In the end, it all worked out, but it’s worth talking a bit about what we learned along the way.
More to the point, I want to get into why design innovation is disfavored as an investment path. Then I want to connect that to what types of projects do end up attracting funding and the toxic effect that’s had on creativity writ large within our industry.
This one is going to get into the weeds.
Grab a coffee.
Settle in.
Ready?
Great. We proceed.
Capital Allocators & The Power of Patterns
Let’s start by talking about allocators of capital. Allocators of capital have been entrusted with the holy and solemn responsibility of determining which teams get funding and what games get made. Allocators might be a venture capitalist or a senior executive at a large publisher. Generally (but not always), they come from disciplines outside of the core game-making crafts. They deal in more arcane and mysterious arts like strategy, finance, and marketing. Even if they have made games directly, that experience tends to rapidly atrophy as they move away from the day-to-day hustle and bustle of development.
This experience gap creates a knowledge gap. Their background gives them an understanding of how to evaluate patterns, but they’re not particularly prepared to speculate on what can conceivably done. They theorize about extensions from the current state, applying previously learned lessons about market shifts or business model shifts.
There’s consequences to that knowledge gap.
The primary consequence is in what is viewed as investable. Allocators of capital tend to favor investing in patterns they recognize and understand or, absent that, just following the herd and doing what everyone else is doing (the FOMO theory of investment). There’s safety in numbers. It’s not an insane approach to things, but it does limit the field of investment-grade pitches to a pretty narrow set of trends.
A developer seeking funding is therefore given a choice: mimicry with funding or novelty without it.
Fit within a pattern or forego funding.
Unfortunately, advancements in game design do not fall into the recognizable pattern/FOMO herd category because they are, by definition, an attempt to break an existing pattern by introducing a novelty.
We see this play out in very real, tangible ways in a pitch meeting or greenlight. It comes in the form of the blaring signals that the thing you’re pitching needs to be CATEGORIZED and SORTED into something that’s a part of something that everyone agrees is something. A pattern must be identified.
“What are the comps?”
“What genre is this?”
What pattern does this fall into so I, the capital allocator, can rest assured that the thing you are pitching to me is an acceptable thing? How do I quickly explain to the people who trust me to dole out money that I made a good decision? Ideally it’s something everyone else is doing, but with an even pithier catchphrase attached to it than whatever my competitors invested in.
“Oh…so it’s like Minecraft (acceptably large audience) but for the metaverse (acceptable place to park Limited Partner money)?”
NO. PITHIER.
“NFT Voxels. Blocks on the blockchain. The blockaverse.”
What trends might be most appealing depends largely on who is sitting on the other side of the table and what they want to hear. In AAA, a good pitch tends to involve a reference to some other game that has been very successful somewhere else associated with some marketable theme/IP — It’s like Breath of the Wild but with Ninjas (because we own the Ninja franchise and they’re very cool). In startups, it’s often some reference to a scale game but with a platform arbitrage — It’s like League of Legends but on mobile. Or Magic: The Gathering, but with NFTs.
In each case, you’re pitching an opportunity that focuses on understood arbitrages, not an advancement in design. In the above pitches, the design has been proven elsewhere, and that helps make the idea “safe” enough to invest in because the risk comes in a better understood and more marketable space. The investor need not worry about the messiness of creativity, because it has largely been eliminated from the equation.
Safe.
Safe is a dangerous word when it comes to creative industries.
Safety is the mind killer.
I don’t blame the capital allocators. The desire for safety is a reflection of their incentives. Pattern breakers are hard to gain alignment on and hard to justify when they fail. If you reach the point where you are given the chance to allocate capital, you very much want people to understand why you made a bet and not blame you if it happens to fail.
“Breath of the Wild with Ninjas” is easier to explain than describing a new genre. Imagine pitching Fortnite if the concept of battle royales didn’t exist. Let’s explore why with a bit of role play (and excuse me while I absolutely annihilate proper formatting to make it more readable):
Gamey McGameDev:
“This entire team versus team shooter market is stale! Sure, it’s making billions of dollars, but it’s ripe for disruption, and me and my ragtag team of four are going to make it happen with our sw33t design.”
Sir Allocator d’Capital the Third, Seed Funder of a Decacorn, LinkedIn Top Voice of 2017, Retweeted by Elon, First of His Name:
Leans forward, adjusts Patagonia sweater vest.
“We already have a shooter.”
Pauses. Squints, a shrewd glint in the eye.
“Does it have superheroes? They’re doing very well in testing right now.”
Gamey McGameDev:
“What? No. Wait. Maybe. Not at first. But maybe later.”
Begins to gesticulate wildly.
“I wanna put a hundred people in a giant map with poison gas that slowly moves inward until there is only one person left.”
Stares offscreen, eyes glazing over, as if peering into a majestic future. A single tear slowly travels down their cheek.
“And they jump out of a plane and do weird dances and it’ll eventually be a metaverse with concerts in it.”
Sir Allocator:
Metaverse?
That sounds made up.
Better to place it in a category.
“So it’s some kind of shooting MMO?”
GameyMcGameDev:
“Kind of. It’s a new kind–”
Sir Allocator:
“MMOs are too expensive, and they all fail.”
=Zoom Call Ended=
Sad.
Of course, the value of hundred person poison-filled skydiving concert metaverses is well understood now, but in this fictional world where there were no prior examples, who would be a funder? Fortnite was pre-dated by all some early indicators — a successful Arma mod, the erstwhile streamer favorite H1Z1, and Fortnite’s immediate predecessor PUBG — but the Battle Royale frenzy only took hold (and attracted serious capital) once scale was achieved and arbitrages became attractive. Then came the Everything Royale era.
Why only AFTER Fortnite was successful?
Because those early indicators weren’t relevant comps to funders — they weren’t strong enough evidence of opportunity. Without scale, Battle Royales weren’t worth paying attention to. Not worthy of attempting to duplicate and exploit. Who cares about a mod that didn’t make any money? Or a AA game with a few excited streamers? Those games were just something that the intern Leeroy Jenkins was playing, and that kid would charge headlong into anything. It’s not the sort of thing respectable people put capital behind.
Why?
Capital allocators sit at a table of people similar to themselves (though perhaps even more removed from game development). It’s a very expensive and pretty table and maybe even has marble accents. I’ve provided a visual aid so you can understand just how great these tables are:
Your top goal when you sitting at that table is to stay sitting at that table. Unless catered lunch arrives, then you risk moving from your seat to grab a Fiji water from the cart.
The best way to stay sitting at that table is by entering into a mutual assured destruction contract known as “alignment.” You want everyone else at the table to agree that the thing you want to do is something they want to do as well. This requires explaining things in terms they can buy into. This reinforces the incentive to travel down known paths. Mutual understanding is so much easier to achieve when there’s a lowest common denominator involved.
These alignment conversations can be depressing.
What are our competitors doing?
If they’re doing it, we should be too, shouldn’t we? If they’re successful and we’re not doing it, we’ll look bad.
If they’re not doing it, we shouldn’t be doing it. If we fail then we’ll look like idiots compared to them.
Let’s just do [trend of the week], everyone is talking about that. No one is going to question that.
Again, the logic makes sense, given the incentives at play. But what’s an intrepid game designer to do?
The Pattern Pitch
If they want to maximize their chances of getting funded, they should become very strong at pitching a well-traveled, design-neutered narrative. Or they can bootstrap and hope to raise after they’ve shown some momentum. There aren’t a lot of contrarian investors out there.
In AAA, the ideal pitch focuses on the ever more immersive world (that can potentially be turned into a content service). Immersion is the guiding light. If a customer is to part with $60-$70 up front, they must be convinced they are purchasing a ticket to a world worth visiting. This world must be fully realized and in high fidelity.
Pitch wonder. Pitch story and characters and fantasy. And quests — main, side, sub, and, if you’re feeling particularly daring, branching.
This pitch will be well received so long as it’s credible. Credible means you’ve done it before or at least have a way to imply that you have — like working at a place that’s done it before. The prize for an immersive AAA game with a solid Metacritic score is considerable. To a capital allocator, it is worth sailing into the AAA open-world red ocean so long as the people leading the journey are viewed as bankable talent.
And, should those creative captains crash upon the rocky shoals, the investors in this misadventure can sadly shrug and explain: we backed the best people and we had to do it — everyone else was doing an open world game. Besides, how could Breath of the Wild with Ninjas miss? It polled great in the focus group! We all booked a loss on this one, shut down the studio and promote the guy in marketing.
A regrettable tragedy.
Free-to-play does not fare much better. It’s avoided the treacherous AAA Path of Ever Increasing Immersion, as it takes much too long and does not work well on mobile devices. Instead, we have constructed a great altar to the God of Data, because the High Priests of Capital Allocation demand it. Thankfully, we have identified the perfect prayer, the one that stands the best chance of bringing precious funding: The Overlooked Optimization.
The narrative is simple. We need not mess about with expensive art books and world building. Instead, we explain that we have seen the TRUTH of the data. Others have mined to unearth gold, yes, but they have missed the mother lode. Invest in us. Let us make [Other Game+1]. We see the optimization they do not, and we have the data to prove it, improve it, and get clicks on Facebook to move it.
Design innovation, particularly ones that push the game outside of identified genres, muddies the waters and kills the pitch. Such innovations should be left to the barbarous modder and the uncouth indie. Those odd creatures create for sport rather than commerciality, and they aren’t to be trusted. And who can understand them anyways?
And that’s where design innovation resides, for the most part. Out there in the gap between investable narratives, experimenting and then throwing it into Roblox or Steam to see what sticks. Every so often, something bubbles up and then explodes outward, radically reshaping the industry on a much grander scale. The disruption is taken in stride by the giants among us, because the idea of a Hundred Person Poison Circle Skydiving Shooting Festival may be co-opted, re-branded and aggressively marketed to success. There is no need to innovate, just iterate.
It’s a very comforting idea to those who would rather not deal with design.
But they’re locked into the wrong pattern. Assuming the old systems of distribution and marketing developed in the premium era will hold true in the service era. That brand equity and franchise strength will endure in perpetuity.
Perhaps.
Perhaps not.
First movers in service innovation that reach scale find themselves in a much more defensible position than within the premium model. Innovative services can reach their audience rapidly and sustain their relationship with that audience for far longer. Those who attempted to compete with World of Warcraft or Clash of Clans will know this well. With free-to-play, mobile and community tools increasing accessibility worldwide, novel mechanics from innovative developers can find an audience and reach scale before larger publishers — who were built on limited distribution models — can react.
Known narratives run the risk of pitching for a piece of pie that may not be attainable and is far less attractive than baking the pie and carving out the hefty first slice.
Battle royales upended the entire shooter market overnight. Think about that. The largest, most invested in genre was completely re-oriented. All due to a set of system design innovations that were well mapped to the modern era rather than tied to the past.
That’s the power of the Design Lane. It’s the beginning of the disruption, not the end of it. More systems will come and redefine how people interact with known genres. We’re in the infancy of understanding the relationship between community, game design and services. This is not a mature field.
It’s wide open.
If only someone were willing to fund it.
We were fortunate there. In the next part, I’ll go over what we’re up to at Fortis (www.fortisgames.com) and the challenges of building a Design Lane company. It’ll be filled with joy and terrors.
And pith.
Can’t do anything without that.
Authors: Shawn Foust
Published: