David Rosenthal: belief

Transcript context

…You could be cynical about it. You could say that that is the result of the fact that Sony has dominant market share. If you were the dominant market share player, you might not be so embracing of openness, either, because you had a competitive advantage. I think it's going to come back to bite them in the ass over time. It's interesting. At one point, I think in the series, you guys say that with your investor hats on, it would be really weird if an entrepreneur approached you today and said, I'm going to build a game for a console. But everything we're talking about, if the era of cross play really comes to bear, that might change things. Would you agree? If it truly is that you could build a forever game with cross play across console, PC, mobile, as part of our Nintendo research, we talked to the CEO of a very large venture-backed gaming company that is not on the Switch right now, that is working very hard to come on the Switch for this very reason. I will say, yes, it is now viable. I would not counsel any of my portfolio companies to launch on the console because the hoops that you have to jump through for approvals, for manufacturing, et cetera just in general, are dire. They are not the kind of thing that I would put in front of a company that was struggling to find product market fit. That said, I have greenlit a switch skew at that game company for Sky. That has now come to market, and it is really meaningful. We have a PlayStation 5 skew as well. For an established product, where it's already found product market fit on another platform, on a more open platform, sure, finding that adjunct as Fortnite disclosed in the Apple lawsuit, the cross play players monetized the new whales. They were monetizing it at multiples of what the non cross play players were playing. Why not take advantage of that as a startup? It turns out that, actually, there are different moments in console, where console really was the packaged good, and then at some point, the package good business for the games. At some point, free to play games were able to thrive. You have the Fortnite actually do really well. If free-to-play games are really driven by social or playing with your friends, which Fortnite was, you need to have it on console as well. Think about it demographically. If you've got a game on the console, for example, we were talking about this with one of our co-workers about FIFA Ultimate Team, which you may be familiar with, which is a playing card add-on to the underlying FIFA skew, where you can buy card packs, open them, and then you can play with those players that you get in the card pack in the sim. That is a massive business. It is greater than a billion dollar a year business selling literally bits. It is a 99% gross margin. It's the most astonishing business. This person was saying, look at the attach rates for FIFA Ultimate Team. Can't we accomplish those with a free-to-play game? We were like, whoa, slow down, you understand that you're selling a $20 add-on to somebody who's already paid $60 for the game and $500 for the console. The willingness to pay of that user, it cannot be compared to getting somebody from zero to one on a free-to-play game to put their credit card in for the first time to buy a virtual good on a free-to-play game. I think that nuance is lost on a lot of people when they look at the industry.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.