The Exchanges

Q compare like the structures of your EAs and Of the world who didn't have the paid distribution channels of your Facebooks and your Instagrams and all the likes that we have today, and comparing that to the structure of the organization that you have to build today, where paid and cat-to-LTV is a prominent part, How do those structures compare with the differing element of the cat to LTV integrated?

A So at Electronic Arts today, it's different because Electronic Arts has evolved and changed, and so it'd be difficult for me to kind of comment specifically on On how the company there is structured today, but while I was at Electronic Arts, our primary method of distribution was to consumers on DVDs that they purchased in stores, and so that meant having a sales force that sold directly to those retailers. Electronic Arts actually, in the game space, pioneered the idea of a direct-to-retailer distribution model, and it was one of the very, very powerful assets that the company has. You know, when you think about EA, you think about it as Oh, it's the company that makes Madden, or it's the company that makes FIFA, or Battlefront. And, and certainly those franchises have helped that company grow and develop, but its first great asset, I think, was its sales force and distribution. And it afforded it the ability to, by going directly to the retailers, essentially muscle in and get more shelf space for the products that it was selling. And so, at the time when I was at Electronic Arts, you built the game. Those games cost anywhere from five to a hundred million dollars to make. You launched them on a predetermined date. You pre-manufactured the discs and then sold those discs directly into retail, and so demand planning, the scale of production, the amount that you were going to s…

AI assessment note: “If you compare and contrast that To the type of organization that you need to build”

Q Can I ask, in terms of the decision making around whether it's the right choice, how did the decision making look like for you with NG Moco? And would you have any advice to founders who are maybe entering that contemplative process?

A So, specifically with NG Moco, we reached a point where we felt like the valuation that we could get for the company at that particular moment was at its peak, at least for the short term. This apex evaluation that it would be difficult for us to get back up to again on a multiple basis for many years. And so as we realized that we became more open to the idea of being acquired, although it was not general operating practice to kind of focus on that or, or think about that, but we became open to it because we just realized, Hey, you know what? The market is beginning to get much more crowded. The position that we hold will only be defensible for us, you know, for a relatively short period of time, and so now we would be open to the idea of being acquired, and that happened to coincide with a number of companies approaching us and saying, hey, you know, would you be interested in joining us? As we went through the process then of assessing whether or not those companies would be a good fit, there were really two things that we paid attention to at the time. The first is the obvious, which is like, is the valuation appropriate for For where we were in our life, did it feel like the right thing for us to do economically for our investors and our employees and the founders of the company? But the second thing was, would it be an enriching experience? You know, we were not particula…

AI assessment note: “there were really two things that we paid attention to at the time.”

Q No, that's why most people say Twitter, so I completely understand. What would you most like to see change in the world of startups and VC?

A I would most like to see VCs respecting the time of entrepreneurs. I can tell you that when I go spend time talking to a VC, there's three types of interaction I have. There's one interaction, which is like very exciting. Holy shit. We have to work together. Those are obviously great, but they're few and far between. The second, which I appreciate almost as much is the, yeah, we're not interested. Thanks for your time, but we're highly unlikely for us to do anything. And the third is, oh yeah, you know, we should stay in touch. You know, how about we try to schedule something, you know, for a month from now or eight weeks from now, that kind of slow roll or slow no is, you know, it's just wasting the entrepreneur's time. And I get why the VC might want to do it from a, you know, retaining optionality standpoint. But at the end of the day, the likelihood that I'm going to end up working with someone who's so rolled me is really, really low. So I think everybody would just be much better if it's like, Hey, yes or no.

AI assessment note: “I would most like to see VCs respecting the time of entrepreneurs.”

Q I am intrigued kind of if you delve kind of one layer slightly deeper into the distribution element. We had James Currier at NFX on the show, and he stated that his views have maybe changed on paid versus organic channels as a necessary organism for growth. How do you think about paid versus organic, and has that maybe changed over the years with the starvation of oxygen from distribution?

A Yeah, it's an essential channel. It's very difficult for me to imagine building a business with any predictability that relies on, as its sort of core premise, the idea of making things that are popular and viral solely. You know, you're happy to have things, and you strive to make things that a broad audience of people like, and that has the mechanisms to be adopted organically from customer to customer, but you really do have to appreciate and respect Paid channel as a method to find customers. And so what that really means is you start looking at your business as an LTV versus CAC business, and that then has huge implications on the type of organization that you build, the type of products that you build, how you engage customers, how you monetize customers, how you hunt for those paying customers within the marketplace. I'm not sure, by the way, necessarily that free and open distribution necessarily makes it easier for customers to find the things that they want. You could make the argument that in a sea of products, it's equally difficult to find stuff if it's not editorialized or presented to you in a certain way, but my sense is that today, paid is the number one thing that you need to think about, especially if you're operating in a very dense or crowded marketplace like the app stores.

AI assessment note: “my sense is that today, paid is the number one thing that you need to think about”

Q Can I ask, my partner Fred Destin always stresses the importance of board intimacy between founder and board members. How do you view board intimacy and significance, and how do you really look to build it among the founder versus the board member? In terms of that radical transparency, that honesty, that kind of connection?

A I think that you have to be radically transparent. There's no benefit to being anything other than radically transparent, and you have to start that from the very outset. You also have to understand that, and the board has to understand, that at the end of the day, you're the CEO of the company, and whilst you will listen to the feedback that each individual provides you with, You need to make decisions that you think are in the best interest of the organization. So for me, I guess my, my methodology for working with our board, it's one, pick a great board. It's to communicate with them frequently and transparently. Three, it's listen to them individually and listen to them as a group. And when you see patterns that are off where you're headed, lean into that As quickly and as early as possible. Surface that. Have a conversation. Because if you've got a group of people that you believe in, and that you trust, and they're giving you advice in a vector that is different than the vector you're pursuing, you're actually more likely to be wrong than you are to be right. And so, being a good listener, trying to understand what the board is really telling you is very important.

AI assessment note: “I think that you have to be radically transparent.”

Q I am intrigued kind of if you delve kind of one layer slightly deeper into the distribution element. We had James Currier at NFX on the show, and he stated that his views have maybe changed on paid versus organic channels as a necessary organism for growth. How do you think about paid versus organic, and has that maybe changed over the years with the starvation of oxygen from distribution?

A Yeah, it's an essential channel. It's very difficult for me to imagine building a business with any predictability that relies on, as its sort of core premise, the idea of making things that are popular and viral solely. You know, you're happy to have things, and you strive to make things that a broad audience of people like, and that has the mechanisms to be adopted organically from customer to customer, but you really do have to appreciate and respect Paid channel as a method to find customers. And so what that really means is you start looking at your business as an LTV versus CAC business, and that then has huge implications on the type of organization that you build, the type of products that you build, how you engage customers, how you monetize customers, how you hunt for those paying customers within the marketplace. I'm not sure, by the way, necessarily that free and open distribution necessarily makes it easier for customers to find the things that they want. You could make the argument that in a sea of products, it's equally difficult to find stuff if it's not editorialized or presented to you in a certain way, but my sense is that today, paid is the number one thing that you need to think about, especially if you're operating in a very dense or crowded marketplace like the app stores.

AI assessment note: “Yeah, it's an essential channel. It's very difficult for me to imagine building a business”

Q Can I ask, in terms of the decision making around whether it's the right choice, how did the decision making look like for you with NG Moco? And would you have any advice to founders who are maybe entering that contemplative process?

A So, specifically with NG Moco, we reached a point where we felt like the valuation that we could get for the company at that particular moment was at its peak, at least for the short term. This apex evaluation that it would be difficult for us to get back up to again on a multiple basis for many years. And so as we realized that we became more open to the idea of being acquired, although it was not general operating practice to kind of focus on that or, or think about that, but we became open to it because we just realized, Hey, you know what? The market is beginning to get much more crowded. The position that we hold will only be defensible for us, you know, for a relatively short period of time, and so now we would be open to the idea of being acquired, and that happened to coincide with a number of companies approaching us and saying, hey, you know, would you be interested in joining us? As we went through the process then of assessing whether or not those companies would be a good fit, there were really two things that we paid attention to at the time. The first is the obvious, which is like, is the valuation appropriate for For where we were in our life, did it feel like the right thing for us to do economically for our investors and our employees and the founders of the company? But the second thing was, would it be an enriching experience? You know, we were not particula…

AI assessment note: “we reached a point where we felt like the valuation that we could get”

Q I would love to discuss another concern with regards to kind of the platform Platform shift itself, and one that Peter Fenton said on the show, with regards to the starvation of free and open distribution, how do you think about this in the kind of potentially fallow period for consumer, in the incumbency advantage there of Google, Amazon, Facebook, Apple, and how you think about distribution of your content?

A Yeah, I think the fact that we don't have free and open distribution in the long term stifles the rate of change. I think the primary reason for that is often that platform holders and consumers' interests are not Not necessarily always aligned. You know, if you think back to Apple's introduction of IAP, for example, within a, this is within a constrained platform like iOS or the App Store. There was a long period of time, a relatively long period of time, where Apple said free apps are always going to be free. Paid apps are always going to be paid. If we have an in-app purchase product, it will only be available for paid games. And of course, today, the scale of the Free, freemium, free to play marketplace relative to pay for download marketplace is pretty dramatically skewed towards free. It took a lot of lobbying, a lot of effort to get Apple to see that opportunity. If that had happened a year sooner, the market may have grown much more quickly. Those misalignments between the interest of the platform holder and the, or the opinion of the platform holder and the interest of consumers were Basically means that the rate of change in those constrained systems just isn't quite as fast as it would be in an open system.

AI assessment note: “the fact that we don't have free and open distribution in the long term stifles”

Q No, I completely agree. I love that. Summization of the three different types. I would love to finish on the next five years for you and for network. What does the roadmap have in store for us?

A Ultimately, I think that there is an opportunity to build an entirely new type of gaming company and then media company that's born from games, a company that's as enduring as, as electronic arts has been or Activision has been in the space. In the Western markets, I think there's ultimately the opportunity to build a company that is as meaningful and as impactful and as scaled as a company like Tencent has been in the East. People often forget that 55% of Tencent's revenues come from games. The games industry is exceptionally scaled, and the audience of people who grew up playing games are the same audience of people that watch television shows, Go to movies, participate in many of the consumer things that your listeners fund. And so for us, what that really means is how do we go build a company that has the ability to prosecute that scaled marketplace today? And so that means these high LTV games where the lifetime value is higher than the CAC, a very sophisticated user acquisition organization that forms the basis of a new type of publishing company. And then all of the apparatus necessary to do that well today. Tools, Technologies, systems that are made available, not just to our own internal teams, but to other game teams and game companies and application developers that might want to operate their user acquisition at the same scale and capability that we do today. And th…

AI assessment note: “five years from now, we will be on the path to building the next great”

Q I would love to discuss another concern with regards to kind of the platform Platform shift itself, and one that Peter Fenton said on the show, with regards to the starvation of free and open distribution, how do you think about this in the kind of potentially fallow period for consumer, in the incumbency advantage there of Google, Amazon, Facebook, Apple, and how you think about distribution of your content?

A Yeah, I think the fact that we don't have free and open distribution in the long term stifles the rate of change. I think the primary reason for that is often that platform holders and consumers' interests are not Not necessarily always aligned. You know, if you think back to Apple's introduction of IAP, for example, within a, this is within a constrained platform like iOS or the App Store. There was a long period of time, a relatively long period of time, where Apple said free apps are always going to be free. Paid apps are always going to be paid. If we have an in-app purchase product, it will only be available for paid games. And of course, today, the scale of the Free, freemium, free to play marketplace relative to pay for download marketplace is pretty dramatically skewed towards free. It took a lot of lobbying, a lot of effort to get Apple to see that opportunity. If that had happened a year sooner, the market may have grown much more quickly. Those misalignments between the interest of the platform holder and the, or the opinion of the platform holder and the interest of consumers were Basically means that the rate of change in those constrained systems just isn't quite as fast as it would be in an open system.

AI assessment note: “the fact that we don't have free and open distribution in the long term stifles”

Q compare like the structures of your EAs and Of the world who didn't have the paid distribution channels of your Facebooks and your Instagrams and all the likes that we have today, and comparing that to the structure of the organization that you have to build today, where paid and cat-to-LTV is a prominent part, How do those structures compare with the differing element of the cat to LTV integrated?

A So at Electronic Arts today, it's different because Electronic Arts has evolved and changed, and so it'd be difficult for me to kind of comment specifically on On how the company there is structured today, but while I was at Electronic Arts, our primary method of distribution was to consumers on DVDs that they purchased in stores, and so that meant having a sales force that sold directly to those retailers. Electronic Arts actually, in the game space, pioneered the idea of a direct-to-retailer distribution model, and it was one of the very, very powerful assets that the company has. You know, when you think about EA, you think about it as Oh, it's the company that makes Madden, or it's the company that makes FIFA, or Battlefront. And, and certainly those franchises have helped that company grow and develop, but its first great asset, I think, was its sales force and distribution. And it afforded it the ability to, by going directly to the retailers, essentially muscle in and get more shelf space for the products that it was selling. And so, at the time when I was at Electronic Arts, you built the game. Those games cost anywhere from five to a hundred million dollars to make. You launched them on a predetermined date. You pre-manufactured the discs and then sold those discs directly into retail, and so demand planning, the scale of production, the amount that you were going to s…

AI assessment note: “If you compare and contrast that To the type of organization that you need to build”

Q Did you communicate when the alignment wasn't there? And is there a right way to do that?

A I did not personally do a great job of doing that, but it is important to do. I think at that stage in my career in particular, I was very, very focused on charging forward. And so sometimes when you're in a large company and the large company doesn't quite see your vision and you're not doing a great job necessarily of communicating it, you can butt heads more than not. I was fortunate in that. 51% of the time, I was right, or 51% or more in my, my assessment of what needed to be made, or how we should build something, and so I was given the benefit of the doubt in most cases. But I do think that it's very important for a leader to be able to communicate upwards, outwards, you know, throughout their organization, and that's certainly something today that I hold sort of very, very dear to the way we operate here. So I think that's one lesson. I think, you know, EA is a consumer of Company and you're trying to build things for the mass market, the mass market of gamers. I think one of the lessons that I learned really from working on Lord of the Rings, so I built a series of Lord of the Rings games in a very close collaboration with Peter Jackson and Wingnut Films and New Line Cinema, and they were very successful series of games based on movies, and one of the lessons I learned from Peter Jackson is that the path to the mass market goes through the hardcore, and so every audien…

AI assessment note: “I did not personally do a great job of doing that, but it is important”

Q Did you communicate when the alignment wasn't there? And is there a right way to do that?

A I did not personally do a great job of doing that, but it is important to do. I think at that stage in my career in particular, I was very, very focused on charging forward. And so sometimes when you're in a large company and the large company doesn't quite see your vision and you're not doing a great job necessarily of communicating it, you can butt heads more than not. I was fortunate in that. 51% of the time, I was right, or 51% or more in my, my assessment of what needed to be made, or how we should build something, and so I was given the benefit of the doubt in most cases. But I do think that it's very important for a leader to be able to communicate upwards, outwards, you know, throughout their organization, and that's certainly something today that I hold sort of very, very dear to the way we operate here. So I think that's one lesson. I think, you know, EA is a consumer of Company and you're trying to build things for the mass market, the mass market of gamers. I think one of the lessons that I learned really from working on Lord of the Rings, so I built a series of Lord of the Rings games in a very close collaboration with Peter Jackson and Wingnut Films and New Line Cinema, and they were very successful series of games based on movies, and one of the lessons I learned from Peter Jackson is that the path to the mass market goes through the hardcore, and so every audien…

AI assessment note: “I did not personally do a great job of doing that, but it is important”