Making Magic: A Business Model for Divergent Thinkers

[Music] hi i'm guha bala president of valance studios i'm kartik bala kuha's brother ceo of valance studios you know previously we were founders of vicarious visions which we started when we were both in high school back in 1991 in our parents basement vp became part of activision blizzard in 2005 we led the studio for 25 years and worked on some good games and then we set out on a new adventure to become entrepreneurs again we founded balance studios in 2016 to build a studio focused on discovery our desire is to build a sustainable studio with creative and financial independence where industry veteran teams could take the sort of creative risks and create new kinds of game experiences we're a studio of around 90 employees right now based in troy new york and simply put our mission is to create breakthrough games that are magic

our first couple of games you know first one we launched last fall super proud of it mario kart live home circuit released october 2020 in partnership with nintendo now that's a mixed reality video game that brings the mario kart experience into the real world by merging an ar camera enabled rc card and a video game world into one it was a prototype that was invented at valen and then developed into a fully realized game in partnership with nintendo and just announced recently is knockout city a new kind of online multiplayer team-based action game in partnership with ea originals the core mechanic is based on the simple premise of throwing and catching a ball and amplified into a dodge brawling online game there are so many technical and design challenges with this title with latency being a key issue that the team had to build a new game engine

from the ground up to pull it off just a quick plug we've got an upcoming cross play beta april 2nd through the 4th i'd love for you to join and check it out i think you'll like it now the game will be coming out in may and in partnership with with ea originals now the games couldn't be more different but their path to discovery and creation have a lot in common you know when we talk about the the culture of discovery at valen for us it's essential to think about convergent and divergent thinking they're starkly different approaches to creativity it's not that one is better than the other but they serve very different goals now we hear everyone talking about innovation but what does that really mean is it making something that exists better or doing something totally new a lot of great developers focus on being the best in their craft this often overlaps with the goal of

being best at what exists they're in existing game genres there are established game behaviors for consumers it's easy to understand when described or you pitch or you show a trailer and craftsmanship is key and these are examples of convergent thinking where your best in class you know most franchise extensions are based on this it's easier to plan for communicate fund and publish then there are developers who focus on something new at first every pitch starts with hey this is really new but we found that really new ideas have a few things in common uniqueness is key you feel different when you play it it has a unique emotional response the moment-to-moment interaction is different whether it's narrative or it's a new kind of twitch based mechanic it feels different at its core

it's hard to describe it with just video and text playing is believing you got to get it in you know players hands so it's really important overall you know to make an explicit choice in which way you want to go because it becomes the basis of your culture as a studio and the business model when we decided to be a game developers as creative people often do we often think about the new things we're setting out to invent to think differently but we quickly discovered that most of the commercial opportunities that are out there were built on convergent thinking rather than divergent there's a lot of reasons why convergence is iteration and craftsmanship it's the only way to become and stay the best in class in a very competitive marketplace companies iterate for a variety of reasons first they're committed to their value chains

and their business models the value chain is a set of organizational choices that they've made people infrastructure management bias like how you think about business in the industry these things are woven together in a system of activities how they're going to deliver for their customers their business models in particular are sort of errors of focus they really specialize and differentiate in their business models some companies are committed to free to play games some are very category specific mmos or mobos as the case may be and some are premium price publishers no matter what they do to do things differently they come from that place each of these companies strategies are as much a factor of their current resources and expertise as they are about where they'd like to be in the future second big reason uh the companies iterate all companies need to focus usually around how they're currently delivering their cash flows to

both their cut from their customers uh to their shareholders and sounds really smart to have a complex strategy the problem is complex ones don't usually work simple strategies with focused execution is what really works that's a lot of the reasons why companies iterate as well there's also more reasons there's lower market acceptance risk when you put all the capital uh into building a game all the cost the money the effort the time it's much easier to know is there anyone out there that's an audience for your title it's easier to focus test and research it however formally or informally iteration is much easier to do this it's a lot easier to forecast financials you can look at similar titles out there and say hey i can make this a little bit better a little bit plus 10 so the bottom line is is that it's a lot easier to invest in a bigger bet that's even better for customers by

giving them more of what they already love you know finally and this is one thing that's uh always been a little uncomfortable for people to admit it's something that we've gone through as well there's a lower chance of failure at least until the idea gets old there's a lower chance of failure in iterative ideas because when was the last time someone got promoted to the company for failing in the marketplace well typically if you fail in the marketplace um you blow up uh and you're creating sort of a career limiting move uh so you tend to iterate rather than do something completely different um everyone seems to have the story of the brand that they helped create as uh executives in a company you know i was part of x team or y team usually people don't talk about i was part of a team that took a risk and it didn't work out and then finally and this is a big one it's a lot easier if you're in a hundred

million dollar business to get the extra 10 percent so over 10 million dollars of revenue or in a billion dollar business and get an extra 100 million well that sounds really like a big number right then it is to get to the first 10 million of revenue on a new idea or the first hundred million dollars of a new idea uh and so for someone looking to build a career uh jumping off the deep end with a brand new idea it's the reason why creative people sometimes get in the business but it's not the best path for the most predictable career frankly if all creative companies did was divergent thinking uh and so everybody in the world is doing things differently and eventually their luck might run out uh even the most divergent of innovators need some convergence and iteration um but of course the same old same mold as we say gets old um there's always room for something new especially now now that's a lot of the reasons why we

got into balance studios and started our studio in the first place but especially now it's a good time to recognize that the industry is very cyclical it's always in a process of consolidation and fragmentation and there always breakthrough new products coming supposedly out of nowhere usually it's a team that worked for 10 years to get the right idea going it's been incubating forever but supposedly all the new ideas come out of nowhere established game categories are getting bigger that's a truism you know that's where the consolidation's happening only the top three mobas are getting the consumers today the top few battle royales top few match three games uh and they have staying power because they can invest at scale and uh before that uh before today uh or you know now big publishers controlled access to capital distribution marketing and pr

but at the same time we've never experienced a time where each of these areas are more disaggregated when it comes to new types of experiences there's always new capital or always capital chasing your creative the different distribution options virtually for any any business model and this world-class marketing pr uh that's looking to support the best new creative so we frankly don't see many advantages of being within a single large organization especially if you want to get something done that's new there are multiple routes for new exp unique experiences if you're deliberate in your choices it's not it's not actually the field of dreams where build it and they will come it does take a few very deliberate steps uh we'll talk about our perspective on doing the divergence um the key as far as the bill is for us to build ideas that are

simple uh by simple it remains really easy to get easy to understand accessible it's easy to get into and start playing it's something that is emotional or captivating within the first few minutes of play it doesn't take a long exposition long sort of experience to really understand what it is and say ah this feels different but simple doesn't mean it's complex under it's not complex under the hood a lot of times simple ideas haven't been done before because they're super hard to do second principle defensible is there a secret sauce that makes this hard to copy you know i remember when the first couple uh battle royals came out and we went to e3 with our you know working prototype for knockout city this was 18 months in incubation we got to feel really good we want to show it to others and so many people thanked us for not showing them another battle royale there was about 50 to 100 other battle royales in

development because the ones that have been established and quickly got them to scale and uh the new ones that were coming out were just competing for diminishing audiences not great barriers entry wants competitors for already at scale so think about secret sauce why is it hard to copy but also what the set of capabilities on your team that makes your team unique and probably the best to do it as well third principle is it scalable scalable in a sense of player engagement can engage a player for hours days weeks and months and second can you engage numbers of players can you do hundreds of thousands of users can it go to millions of players these tend to be very important because when you're taking very risky bets hopefully there are many many people willing to enjoy it over long periods of time sometimes takes a while to figure those things out so you know when we started villain studios our initial focus was not about any specific game idea it

was all about defining what kind of culture we wanted to to cultivate the type of team we wanted to assemble you know we really wanted to bring together veteran talent as well as new talent who are all about going after bold new ideas and so that kind of divergent thinking it's it starts with the team so it's it's really around you know building a core team and giving them the room to explore you know it's amazing how we hear all the time that um a lot of brilliant creative and technical you know folks they weren't given the room to explore and uh and you know these are folks who are deeply curious deeply curious about new play patterns they're not just dreamers but they're makers and at villain there's no separation between inventors and developers it's not like we hand it off to some some other you know team to go to go build you know we build it you know come up with the ideas and start building and prototyping and proving or disproving the fun and it's

all about trying to have the smallest possible team to find that atomic core unit of fun you know that makes that makes the game work you know above all like the team needs to have permission to fail you know failing needs to be seen as equally as good outcome as success it's when you don't know which one it is that that makes it really difficult but the team needs to have that permission to to fail so they can actually take uh some bold steps so you know the core limits this test is can the team build it and then hand the controller over to someone else to feel that magic you know and people just stop playing and they walk away or they can't look up you know that's a that's a really important uh metric you know the the second thing is like you know once you kind of like define that culture and you've kind of assembled that team

then it's really about a sort of a structured r d process that comes second and i'm not talking about pre-production pre-production comes after this sort of period of r d um you know quite frankly we place sort of minimal value on pitch decks or you know videos and all that kind of stuff you know it's really about let's go prototype something and build something and and prove whether something is fun or not and it's really sort of investing against the magic that the team finds you know it's it's it's the team being really passionate about going after you know specific problems that they're that they're trying to solve it's finding the magic in these core interactions that are really novel and unique and and different and you got to build it and iterate on it until we can put it in outsiders hands you know and subject to a peer review and and see what other people think and this

is you try and be as rapid as you can you try and not put a lot of frills around it this isn't about you know unless the game is about an aesthetic that you're trying to try to define and that's what's unique about it you know if it's about moment-to-moment mechanics as an example you don't need a lot of art you kind of focus down on what is really necessary to prove or disprove a concept and you iterate as rapidly as you can and the trick is and this is challenging is that it requires independent funding from the actual project funding because you need to have a lot of patience because the prototype might not work out you may just have to throw it away and do something else completely different if you're prescriptive about the project uh from the from the get-go when you haven't proven like the core magic uh in something that becomes really hard and you know you kind of box yourself in so so really if you can decouple a

different funding source in the r d period when you're looking for that magic then you can you have something that you can then take into pre-production with more of a project financing approach so i mean just a couple of quick examples like with mario kart live for example when the prototyping began it was not about making the mario kart game you know it was actually inspired from drone racing and it was about bringing this visceral feel of driving an rc car in the real world but making it drive as easy as a video game car then i was bringing video game rules around it you know to make it a fun game experiment and this this was a self-funded prototype which was whiskey especially since we didn't know if there was a there there with this sort of experience and we were lucky you know we actually found that magic uh kind of early it was about in that you know seven to nine month type of window that we were able to uh to unlock what's special about it with knockout city we had this core idea

of throwing and catching a ball and every three months or so we thought we had this core figured out we put it in the hands of trusted peers and it failed wasn't wasn't fun but problems with it but the team kept to have it and it actually took 18 months to really nail that core experience that felt great in in people's hands sometimes it's really hard to know you know when you should cut bait on an idea and move on or keep going and at the end of the day you gotta trust the team and and decide as a team whether you want to keep going or do something else you know at the end of the day when you're kind of green lighting a project and you're kind of going into full pre-production and production with the intention of building it you know we believe that the creative should drive the go-to-market strategy and this is often like the opposite of what actually happens uh in companies and large-scale

companies it's it's usually identifying a market opportunity and saying hey we need to go after these kinds of consumers or battle royales are awesome but you know they're really hot let's go make a battle royale um by the way if you play patrol nothing wrong with battle royales but like it's more of a methodology um you know where companies often focus on the market and then say what products should we build as opposed to you figure out something special and new and again this is the path of divergent new ideas that creative tries to go to market strategy and so when you when you do have that magic when you do have that prototype that uh that's really special and unique you then figure out what the right go to market strategy is sometimes you can go out on your own other times you need the right kind of partner you know to be able to take it out to market and if you've again proven the fun and you

can put in their their hands it's a lot easier to go find the right partner where it really just kind of clicks the vision clicks uh the they really understand the game experience and the audience but you can do it independently and if you do if you do it that way you can start small but you want to get it really community focused and into players hands as quickly as possible now like mario kart live was a very different set of go to market challenges than than knockout city you know with with mario kart live we had a hardware and software experience that we needed to to build at scale and nintendo was a great partner for us um you know for that project and with knockout city it's a digital only live service you know game with uh with a lot of infrastructure requirements to pull that off and we talked to a number of different potential partners when we had our prototype and and the ea and particularly the ea originals label you know became the right partner for us

ultimate goal is you know is getting it into gamers hands you know that's what we're really trying to do now we've talked a lot about divergence uh divergent thinking there's a point at which you got to make the sucker so um this is where the dreamers have to become doers transition from divergent to convergent in order to build it and ship it and evolve it so sustainability is all about saying hey look we found the magic we know what really is something special and new we figured out here's a risky but viable pathway to market pair the partners that we need to do it you got to put it on a timeline you have to make it building and shipping it and then evolving it is really has sort of how we think about this as sort of a complete package building is iterative um it extends beyond launch

but we don't think that it's uh or and part of that is because player feedback is key this is something totally new so you think you know how players will respond to it you can even focus test it along the way and that kind of thing but you don't really know until your experience is out in a while you know we we didn't really we put track creation into mario kart live but there isn't a native sharing feature in mario kart live we were astounded it's there's so many makers out there that are building amazing courses and posting them and making the experience really their own gives us a real insight into ugc in the real world something that we found out we knew that building was a fun part of what we're doing we didn't think that the community would embrace it quite the way that they wound up doing it so shipping it is just a step along the way of delivering an amazing experience but uh and then budgeting and planning is harder in this context

because uh when you're looking at okay well how much do i have to build into this before it needs to get out um what kind of break-even do i need to have they don't have easy comparables um so keeping it as tight as possible in that initial feature spec is super important because you are taking a risk because eventually the market needs to accept it and then you need to you know go from there now uh the fundamental truth and i think every developer has encountered this especially on new stuff everything takes a lot longer and costs more than you think to build some safety margin in there in your system as well as you're doing this importantly though and we've heard a lot of talk about this um in software and startup culture minimal viable product is a really hard concept for us to get our heads around minimal viable product often means hey look you just have this little bit and people are going to pay you for it and then you can take it to whatever future it needs to have what we think we need

to do is determine the scope of the experience that feels complete at launch but has the potential to grow it represents a value for your pricing model but then you can evolve it from there you know fundamentally it's about finding your audience listening and evolving it with a player community and all of this is a combination of iteration about being as rigorous as you can be patient as you can be and getting the thing out so all of these these these are sort of it's sort of a four-part concept um you know we summarize in our business plan that we've actually posted here this is a big you know complicated as you can see uh plan now just a little bit of background you know karthik and i both have mbas uh there's a proverb in silicon valley you take the number of engineers multiply it by ten divide it by the number of engineers uh divided by the number of mbas that you have and that's your iq as a company so fortunately there's just the two of

us and there's lots of great people here at valence we've experienced being indie before it was cool when we first started we've been in large studio environments as well and with mega franchises now being back at india it's fine for a different kind it was important for a different kind of plan um you know beyond the 50 to 100 page decks before but beyond all the market studies and things like that we really laid it out to the simplest possible method that we can have so build an awesome team find the magic in something new that the team is truly passionate about because passion drives the patients and the insight for innovation figure out how to get the market because if it's really great there's probably a way to do that probably partners that can help you do it as well and then build it ship it evolve it with a community so that's what we set out in october 2016. um and uh look some of this is a work in

progress um we've had some success with mario kart live we have great expectations for knockout city we think you're going to love that too but what we found overall is this simple is hard so it's always easier said than done so every bit of the plan you know simple plans have a shot at working because there's a million details to execution and execution has to be great both for consumers as well as the compete in the marketplace complex strategies tend to fail because you're stacking complex strategies on top of complex execution so the most important thing for you to do in all this is to be able to say how simple can i make my effort my proposition uh well we're on a journey uh good luck on your journey you know when we look for ideas we look for the best ideas that are simple and powerful with hidden depth and nuance we try to find them in creative people everywhere and bring them to

bring them together in an awesome team our effort advanced studios is to build a sustainable model to do this um we just wish that as many people that can do this are doing this because i think that would be great for the industry great for consumers great for players everywhere thank you thanks for spending 30 minutes with us and uh and listening to to uh to this talk appreciate it take care