The Exchanges

Q Alright, I guess, Mark, in that year, in 2008, you ended up partnering or outsourcing the construction of this infrastructure to a startup that, I guess, promised that they could build this for you, and you gave them, like, a million dollars, and, uh, said, alright, go for it, and what happened?

A Yeah, so we were working with a company, um, you know, that seemed very credible from our perspective, where they came recommended by a VC. And to make a long story short, once we were able to bring in Scott Gelb, who became our VP of technology, who had deep expertise around platform, his very first assignment was to go validate where we were with this third party technology provider and came back after a couple of days and was like, this is not going to be at all what we need in order to achieve what we want to achieve. And so that was a really scary moment for the company because this is June, And we then had to call our board and tell them, Hey guys, you know, that, uh, back in technology we were building and the million dollars we spent on this, we're literally going to have to throw it all away and start over from scratch. And that was a horrible moment. Brandon and I were quite terrified that the board would want us to shut down the company.

AI assessment note: “we're literally going to have to throw it all away and start over”

Q And how did you create awareness around the game? Was it, was it by putting those boxes out and then just waiting for magazines and bloggers to review it? Or like, like with a consumer package goods, you'd hire a PR firm, right? And you'd start to take advertisements out. Like how do you, how did you develop awareness?

A We did do PR because, so we tried to get as many interviews and game reviews as possible because that's sort of, you know, free awareness. But what we really focused on was credibility from a positioning standpoint to our audience and then trying to create incentives for them to help bring in other people. So we created a friend referral program as an example. And, you know, where as people with their accounts would bring in other people and Have a code that would give credit to the person who referred them. You know, they could unlock additional content or get sort of a scaling amount of rewards or things like that. And then, you know, YouTube was starting to grow at the time. This was, you know, 2010. And so we created a YouTube channel and we created a show called Summoner Showcase because players of League of Legends were called Summoners. And then we started getting millions of views of this show because people wanted to get their stuff highlighted. And it just Felt like this organic, positive community that people wanted to come be part of.

AI assessment note: “We did do PR because, so we tried to get as many interviews and game reviews”

Q So you must've been under intense pressure. I mean, were you guys super stressed out for that six month period?

A Absolutely. Like the whole team, you know, we were very transparent with the team in terms of How, like, what the situation was, how many resources we had, and one of the solutions that the team came up with was we ended up hiring 1100 people in the Philippines to go play the game, because we knew that if Western audiences participated in a beta with a game of this quality at this point in time, it could, you know, even if there was an NDA, it could really risk the brand positioning. You know, people were like, wow, this game sucks, you know, because it just, it wasn't good enough. The content It wasn't mature. It was really buggy. We didn't have enough of the systems to sort of make it feel sufficiently fun.

AI assessment note: “Absolutely. Like the whole team, you know, we were very transparent”

Q and go buy the physical disc, put it in your computer, and then the expansion packs, and all this stuff, like, that was something you had to do. But from what I, from what I understand, like, you guys started to see the potential for something completely different through, through these modified games. Is that, is that right, or, or is, was that not quite happening just, just, just yet?

A So, so yes. So, um, in particular around Dota, or Defense of the Ancients, and so this became, this is a game, and it, there were multiple iterations of Dota. There was sort of the original Dota, and then there was Dota All-Stars. And Dota All-Stars, in It was a really, really fun game that started to grow virally, because it was, it took the heroes, these, these characters within Warcraft III, and just made it incredibly fun to team up with a team of five players and fight against an enemy team of five players, and all these characters had different abilities, and there was this community site called dotaallstars.com, and as we got deeper into this community, we're like, oh my god, this This type of thing where the developer is connecting directly with the audience and growing it in concert with them over time. This is what the future of the industry is going to look like. And then we thought, well, maybe, maybe we could make a Dota type game. And then we thought, well, maybe the Dota type game, it actually proves this whole games as a service thing. Maybe we should go explore games as a service. And it was that questioning, which then led us to start working on the business plan, which then had us reach out to the creators and Of Dota to start being like, hey, like, why don't we go explore building a company to commercialize this game and demonstrate that we could make it so …

AI assessment note: “So, so yes. So, um, in particular around Dota, or Defense of the Ancients”

Q It crashed, right? It didn't, it didn't, it didn't succeed.

A Yeah, and, and part of the reason is development is incredibly difficult, and especially building an MMO at the time, because Technology, right? Like the ability to build an online game is, is kind of like building a rocket ship where you have to build a game engine and a massive tool pipeline to put assets into the game. You know, you have to be able to build a whole set of server technologies that can scale to support thousands of simultaneous players all running around the world. So just the technology effort is incredibly difficult. And then from a content and gaming perspective, you have to build a world. You needed to make it Feel incredibly good to walk around the world. You need to have a story arc and character classes and races and cities with political history that it all makes sense. And then the game has to be fun. So you have to be able to understand and build systems where it feels good to move and the sound effects and the visual effects are great and the combat mechanics, which is the math behind the game all makes sense. And you want to play it for a long time. I mean, these, it's an incredibly complex thing. And so the company needed to continually raise money and they could never quite get the game Design or pitch or like the, the problems that they were trying to solve, you know, ended up just not resonating when they ended up shipping the game. It was kind…

AI assessment note: “Yeah, and, and part of the reason is development is incredibly difficult”

Q Now, neither of you guys are engineers, right? I mean, so when you were sort of coming up with a plan, the business plan, and iterating, and using the whiteboard, and kind of going back and forth, I'm assuming both of you are like, we need to find engineers to help us build this thing.

A That is right, yeah. Brandon and I were 24 and 25 at the time with no professional software development experience, and so, you know, we Part of the diligence process in terms of building the business plan was really focused on answering three questions, and it was, you know, one, you know, if we build this game and this experience that we think could be great, would it, would it work? Would people actually want to come play this? You know, two, could we attract the capital necessary to fund the development to be able to launch this game? And then three, sort of on a related note, is could we attract developers and the right type of talent to be able to work together with us to, to build this thing? And when all signs kind of pointed to yes, you know, we ended up jumping ship from our respective careers and opening the office in September of 2000 six. But, you know, again, given the lack of experience, we really underestimated the scope and complexity, not only of building the game itself, but then subsequently when we were talking to publishers about financing the game, we quickly realized that that wasn't going to work because Part of the experience that we were thinking about delivering was going to be premised upon having the game be free and needing to go direct to consumer and not having single player potentially exploring alternative business models like digital goods an…

AI assessment note: “That is right, yeah. Brandon and I were 24 and 25 at the time”

Q in, in that first year, you had the lead developer for Riot Games, um, was somebody with a lot of experience, but had a really clear idea of what they wanted to do, which was, it doesn't sound like what you guys wanted to do, and eventually you just, like, Kind of parted ways with this developer. What happened? What, why? I mean, what, why was there so much tension?

A So the tension really was around a lack of shared vision. So we really believed in the ability to build sort of this online experience that would grow and evolve with players. And, and I think given this individual's tenure in the industry, like his entire frame of reference was built around a very different approach and different model, but because Brandon and I had raised the money to go do A particular thing. We were a hundred percent locked in on finding a way to go do what we needed to do. And once we sort of ultimately had this come to Jesus moment where it essentially confided that yet had no interest in building the thing we wanted to build, we then had to, you know, part ways, which then meant Brandon and I were alone essentially to go figure out, gosh, how do we actually do all this?

AI assessment note: “the tension really was around a lack of shared vision”

Q equivalent of, like, doing seven subscription services for one game, buying, Skins and characters and, and, and different items. And it is amazing that you guys were able to see that there was a marketplace for that, because I would have thought, who the hell is going to buy this stuff? But you, like, how did you know back then that there was going to be a market for that?

A I mean, I think our perspective was really shaped by, you know, the, our experiences in all these different communities and playing games so deeply where, you know, we just believed that people would try it because it's free, but they'd stay if it's great. And so it was incumbent upon us to develop such a compelling experience that once people got into it, unless they fell in love with it, unless they love the content, the characters and whatnot, Then they wouldn't spend money. You know, we really needed to establish trust in our player base that we understand what's important to them, that we care about them, and that we're going to invest and also make the experience better.

AI assessment note: “our perspective was really shaped by, you know, the, our experiences in all these different communities”

Q But when you started to show this to potential publishers, how did they respond? Were they like, yeah, I think we can work with you.

A It was sort of mixed. So, you know, we would very enthusiastically show a video of our demo. Sort of flew around the map and it showed some characters and it showed them fighting and things like this. And it had this fast music track playing. And so we tried to hype it up in part of what we were saying is, you know, there are other key messages. It was like, we did all this in four months and we have proprietary technology, you know, talking about the broader opportunity. And so a bunch of publishers were also, you know, just really not interested in particular because of the business model, how he didn't want to have single player. Cause you know, every game at the time, like publishers would tell us, Most people don't play the online component of games at all. They, they typically only play single player. And the business model is really, you get the vast majority of revenue in the first month when the game launches. So why, how could you possibly make a game free and expect to make money on it over time?

AI assessment note: “It was sort of mixed... a bunch of publishers were also, you know, just really not interested”

Q people, that people get joy and pleasure out of, so they are willing to spend five dollars or seven gems or whatever, whatever the currency is, you know, on these things that, that they can then use as part of their character. Like, there's, the point is that there's a lot of work that goes in, like, from your side that goes into developing that stuff that you sell, right?

A A ton of work. So not only do you have to build an incredibly fun game, which is really hard by the way. So if you think about like, how do you go design chess, right? You know, or soccer, you know, or something where people can essentially play it infinitely. There's a lot of really difficult problems to solve there. And then you have to do it from a technology perspective where it has to work and the system has to scale and it has to be able to update. And the balance of the game from a math perspective needs to be incredibly precise. You need the content to be compelling and Where people fall in love with the characters from a creative standpoint in the way that somebody would for, you know, Batman or, you know, any of their favorite superheroes. And so there's so many things that you have to get right. It, again, it's like Brandon and I sort of joke that knowing what you know now, you know, like we wouldn't have invested in ourselves back then.

AI assessment note: “A ton of work. So not only do you have to build an incredibly fun game”

Q it's worked out pretty well, and if you're Slack and Zoom, um, and gaming companies have done well, and this year you introduced a new game, Valorant. Have you noticed in the COVID era, um, just like a, a pretty significant surge in In people playing longer or more people joining the games and, and, and playing the games? Like, have you seen those kinds of trends in your company?

A So yeah, so we are fortunate relative to, I think, many industries in that, you know, when people aren't able to go outside or do a lot of things that they would normally do, a lot of people choose to spend some more of that time playing games. And so, you know, we do, we do benefit. That being said, it is also very difficult, you know, to shift to a remote work model because we're such a collaborative organization where teams work so iteratively and so close together. And so we've really had to Evolve this whole work from home model where, you know, about 99% of our staff around the world are working from home. And it's been incredibly exciting to see rioters find ways to continue to support our games or add content or even launch new games all around the world while doing it all remotely. That's incredibly cool. And then, and because the business is up also, you know, we've been trying to figure out, well, how, what else can we do to help? And so the company's been trying to Donate money to, you know, help frontline workers and, you know, get masks allocated. And, um, you know, I think we've donated several million dollars, you know, just around COVID relief and support, you know, different parts of the world. And so I think from a lot of perspectives, we're just proud of how rioters have responded because we know that this is just a really tough time.

AI assessment note: “a lot of people choose to spend some more of that time playing games.”

Q one of the people on your design team. And, and he was, I guess he was like one of the original designers of Of Dota All-Stars, and I guess he was kind of a big deal in the gaming community. So, so what was your pitch to him? And was it like, hey, come work for us, and we're going to build this big thing? And he was like, sure.

A Well, so, yeah, so Steve Feek, you know, his online handle was Ginsu. And it was very hard to actually track down the real Ginsu online, because there were a variety of people who went under the Ginsu handle. And so, you know, I ended up talking to a guy in Brazil, and he was trying to pretend he was Steve and things like that. And so, But ultimately it took us many months, uh, to find Steve Feek. We brought him on to the company, I think in either December, six or January, seven, but he was working at Best Buy, uh, in Wisconsin and was in college studying computer science. And he was just this incredibly passionate, smart, thoughtful game designer, but with really, you know, sort of self-taught.

AI assessment note: “ultimately it took us many months, uh, to find Steve Feek. We brought him on”