Part II: Gaming's Emotional Blind Spot: Jenova Chen's Strategy Behind Making Journey and Sky

we start to think, okay, maybe we should make it very easy for a player to take screenshots and then we made the screenshots to be higher resolution when you take screenshots in game. So, it's much nicer to share it. And then we decide to add video taping cuz our player was like, "Hey, I want to I want to record video, but this UI is too annoying." So, when they record videos, the UI is uh invisible in the recording. And so then we start to see people uploading more like videos online and I think one of the video went uh viral just some random people playing the game and that thing went viral and then a lot of people start to want to get this game. Welcome to the gaming founders podcast a show where we interview the founders that have shaped the gaming industry. I'm Eden the CEO of Pragma. We build tools for studios to connect with their players and essential services including First Look, our player relationship platform. Connect and Engine are cloud and source-based backends that power many of the world's best studios today. If you have an

interest in getting exclusive access to the game industry's best early access games, sign up at playest.fverlook.gg. And I'm Kevin Zayn, partner at Upfront Ventures. We're a venture capital firm based in LA and San Francisco. I lead game investments both in studios as well as the pick and shovel tools that power game developers and content creators to do their best work, including Pragma. We interview founders on their origin stories, the tactics that helped them survive and thrive, and key lessons for anyone interested in building the next generation of leading gaming companies. Learn more and subscribe today at pragma.gg/gaming founders. Gova is such a visionary and unique gaming founder, we ran out of time on the last episode and had to bring back for another. Much has changed since even that last episode. Whether it's the geopolitical situation globally or consumer confidence impacting every sector including games. In this episode, he laments the Hollywoodification of gaming, the concentration of ever more resources into fewer and fewer proven

IPs. He talks about his own experience building and growing successful new IPs both in the west and the east, starting with the former, then scaling virally in Japan, followed by China. He shares how he struggled swimming against the tide of exploitative free-to-play mechanics, ultimately finding success in transparent monetization, focused on sharing with other players, with friends and family. 19 years in, he's not done yet, and pushing harder than ever to create what he calls the four quadrant game. One that appeals to men and women, boys and girls, hoping to do for games what Pixar and Miyazaki have done for movies and animations. Let's dive right in.
Well, Gova, thank you so much for joining us for round two. we uh didn't get to finish I think even like you know
half half of the questions that we uh had from the last time. Uh so we were like hey we got to do another uh another one of these and get through some more uh a little bit more time.
Well thank you for having me back. Uh it was such a fun discussion last time. I

wanted to come back for more.
Well I guess a lot has changed uh even since we last talked. We were just saying real quick that, you know, we have a new uh political regime in place. I guess you are someone that has a lot of, you know, you're working in China with, you know, some really big games. Uh, and uh, I guess what are your thoughts about um, building for the I mean there's a lot of interesting things happening where you have games like Wukong obviously that are finding huge success in the west, Marvel Rivals. Um, a lot of people are saying that, you know, east, you know, western developers are dead. Also, Steam China has has blown up. So, there's this huge distribution channel in terms of the west shipping games to the east.
Actually, I feel kind of lucky that uh you know, this year it marked a year where I spent exactly 50% of my life in the United States and another 50% of my life in China.
Oh, interesting.
And uh just kind of being a person who's

either belong to both country or belong to nowhere. I'm always
downsider.
Yeah.
Uh it allows me to look at things with two almost like opposite perspective. It it both exists. I can I can understand the perspective of you know people who grew up in China but also in the United States. I can really relate to how uh the west think about the east as well. And talking about Steam, I I heard this data recently that on the uh in February this year during the Chinese New Year, uh the online concurrent player of player from China is 50% uh of the Steam. Yeah, I mean that's that's a national holiday. So there's have a surge, but um you know being able to reach half of the Intel platform is Chinese players, it's pretty crazy. Yeah, I like was just looking at the Triple Eye initiative, this um indie festival, and like I saw like all the sponsors are, you know, it's like Billy

Billy, you know, doi, like all basically like all the sponsors are Chinese uh online platforms. Uh and that's like all western indie studios that are distributing via, you know, Steam. Um because that's such a big and it's like I think like all the growth in Steam has been basically like ch like under the under the radar has basically been in China. It's very deceiving that people think that there's a growth in Steam thinking there's that's the exception but really no I would say overall
the game sales in the west the decline is real
uh even real on steam but because how much the Chinese market has been growing in the past few years it kind of you know disguises that
um and so once the growth of Chinese market getting to steam reach the plateau that we will we will still see the decline of you know kind of the traditional uh AAA gaming in general. Um

so so because both things are happening some people like what's going on here is this is pulling this one's not right this there's like opposing messages but really if you understand what is happening uh in China on Steam uh you will be able to see a much more grim picture of of what is happening uh to the rest of the game industry.
What's going on in China? I guess you're there 50% of the time. Like uh obviously we know the west is sort of struggling with the games industry. Like is are there just like more gamers playing PC console games in China or like what do you see? The entire world is declining. We all agree with that. Right. Econ economically the world is declining. People are feeling more conservative about spending money because they don't have a good face of what's going to happen in the future. If they believe if they believe next year is going to be worse than this year, they would not spend the money that they used to spend. They like, I'm going to keep some just in case bad things happen. This is the the global trend.

But under this trend, you know, when people all decide to spend less money, there will be one exception is the the guaranteed for sure entertainment would win big. You see like if I don't want to spend money, where do I spend money? I spend money on for sure something I would enjoy, right? Yeah. Sure.
So, which are sequels,
uh, which are project that everybody tells you it's so good, you should see it.
So, it creates this weird things. It's like people become less, uh, experimental or exploratory. Like, if I only have money to watch one Oprah, like I don't watch Oprah. If someone want to drag me to watch a Oprah today, I will see one of the most classic, the highest budget, the most well covered Oprah. Same thing goes with movie this year. Look at look at all the animation.

Which animation made big? Inside Out, too.
Yeah,
Moana too. Well, I like Inside Out already. And I heard the two is pretty good. And I only have money for one family going. Which one do I go? I'm not going to go to see Flo, right? I'm going to go see it what everybody have told me it's going to be good, right? So that's also why Black Myth Wukong and Na too in China.
Yeah.
Sucks away all this success, right? Because I'm already not going to spend equal amount of money on gaming this year. Then which game do I buy, right? And I can tell you for sure Grand Theft Auto 6 is going to be very successful.
Yeah. Yeah. Yeah.
I don't know if this game is going to be good, but everybody's telling me Grand Theft Auto is going to be good. At least I should buy that one. Hopefully, I will just save all my money, just play this

one game.
Yeah. Yeah.
You don't need to wait to see the quality of the game. I mean, as long as they deliver, even if it's the same game as Grand Theft Auto 5, people will buy that game.
Yeah. And so what happened is even though Nja 2 the the new uh movie is it $2 billion or something right?
Yeah. Chinese box office box office.
Incredible. Yeah.
Yeah. And uh it really is a terrible thing for the whole movie industry because the movie industry as a whole is already shrinking 50% this year that last year in China and all the money just went to one movie. Can you imagine what happened to the rest of the movies?
It's not just 50% fall.
Yeah.
Yeah.
So to me, while people are celebrating for the success of Black M Wukong or NA 2 in China, it's really all the rest of film and games are not even seen. They died quietly.

How do you think about then this kind of premium, you know, Steam being heavily premium versus, you know, sort of Chinese players grew up on, you know, a lot of free freeto-play titles? Like, you know, seems like some of the, you know, the paid titles is translating. You see sort of more of that happening.
Okay. Imagine Black M Wukong 2 is not Black Mist Wukong, it's Black Mist Dark Souls.
Yeah. Yeah. Sure.
It would not be as successful. It's going back to that again, you know, in a in a bad economic situations, people want to get something for sure. They know it's good, right? And and you know, Journey to the West is one of the most well-known IP in China, right?
Yeah.
And that's also why it's not big in the West cuz nobody know what Journey to the West is, right? I mean, yes, we Asian, we might know, but you know, most of the Western audience don't know and they they know Goku probably that's from Dragon Ball Z.
Yeah. you know, so it it's not that I

mean, sure, it's successful, but it's it's not like as successful as what's in China. And Na 2 as a film tried to enter, you know, international box office, which if you pay attention to it was like miserable because who who knows about these characters and
yeah, you need that formula, you know, that's why to me Inside Out and Moana 2 is successful.
Yeah. I mean, I I feel like I have two responses to what you said. One is just like, do do people just like always think things are bad, even if they're not that bad? Because like, you know, it's like I I feel like there's this dichotomy in my mind of like, okay, unemployment's all-time low, stock market's like all-time high, and like I talked to all my friends, of course, everyone's like, things are terrible, like job market's like impossible. I'm like know the data doesn't really suggest that that any of that it's true. Um
well but you also know the data right that the entire stock market 90% of them are owned by the ultra rich.

Yeah. Yeah. Totally. Yeah. Understood.
So yeah stock market is rising but does it affect any of the employees you have working you know who's middle class. I mean it it doesn't really matter to them. They don't have the the money in the stock. So what they see is coffee is like two and a half times more expensive.
Yeah. But their but their salary is the same or whatever. Right. you know it's not growing right so majority is actually feeling the pain like I even feel it like I used to eat a ramen noodle called sentoka in LA you know I was on like flour and journey I remember every weekend I would spend like 12 bucks or maybe sometimes 15 if I get a combo to just have a good bowl of ramen before I go to work in the office now just buying that alone um well okay buying the same set Uh, it's much smaller serving and it's $25,
right?
Oh, wow. Yeah, that's crazy.
And so I can't imagine how I would be able to live if I was still paid the

same when I was, you know, 10 years ago. So yeah, for me it's like stock market is just misleading. It's like black miss, right?
Right. Sure. you know, like so the reality is you have amazing success and these success would only happen in a financial downturn.
Yeah. Mhm.
And where do you want to position yourself in this near future?
I mean, it does seem like a lot of the I mean, all of the middle has been sort of like sucked out and it it does seem like there are like some successes on the tails. Like obviously the the high-end like you said it's doing
the lipstick effect. The lipstick effect you've you probably know about this, right? During the original financial crisis, uh people still want to cheer themselves up, but they don't want to buy the expensive things anymore, right? They want to buy the cheap the most cost effective uh remedy to make life just slightly better.
Right. Right.
And the cheapest thing to get in cosmetics was the lipsticks. And it

makes you happy and doesn't cost you much and you can use quite a lot. And and what is the the same thing for entertainment then? video game. I heard at least a decade ago people say video game is the cheapest uh entertainment in the world.
Yeah.
Uh I don't know if that's the true anymore given there are uh Netflix now.
Well, Tik Tok is pretty cheap.
Tik Tok, right? And Tik Tok. Um
so, and then there's free-to-play video games.
Yeah. Yeah. Yeah. I mean just following the history I think in the next you know three years if the finance financial situation doesn't become better I would imagine it's either the guaranteed sequels or the free stuff.
How does that uh sort of shape both what you're doing with your current franchises and obviously there's like I'm guessing new games that you're working on and like how are you thinking about the I guess macro shifts or do you even think about that? Does that matter? Like what how does that inform anything?

I started the Sky project 12 years ago. At that time, finance economy is growing great and we choose to make Sky a mobile game and crossplatform games forced us to have to go free to play which I hate hate that business model because
you kind of have to ask people to pay at some point which you know
it's not it's like an interruption of the storytelling
but nowadays I actually feel lucky that we picked that business model.
How did you land on that? like what what was the process for that given that you didn't like that model?
It's survival, right? Like we were working with Apple on a premium game. Um and you know the early days of Apple's business, any any game on uh iPhone that s become successful is because the editorial, you know, featured it.
Yes. Editor choice. Yeah.
Right. And so we were like, okay, we're trying to make a game that is evoke the emotion of a Pixar film. And guess who's

the CEO of Apple, right? So uh at the time I think Mitch Laski was on the board and he he really feel like hey this is a great business model because Apple would love this type of content right and but in three years uh when we are about to ready to launch the premium title the app store folks are talking to us to say hey um you should really think about changing your business model because they know how much money we're dumping into making the game. It's a very expensive game to make and they worried we won't be able to recoup. And so at that point they showed us the data, you know, like the the number one premium game at the time was Moan Valley. Uh it sold at $3 and uh it was only barely hitting 3 million units.
Wow.
And after you remove the Apple tax, it's like $6 million, right?
And uh we already spent more than that at that point, you know, working on this game. So they say, "Hey, you guys got to

change your business model." And then we we were looking into all the all the game they suggested. You know, at that point it to to summarize it, it's a lot of exploitation.
Mhm.
Either it's a impulsive purchase based on greed and fear uh or it's a competitive spendings for revenge and and and wrath or the combination of the two. So uh yeah looked at all the business model and we just didn't feel any of them would work with a Pixar like emotional content which we want to you know kind of appeal to the positive side of humanity
and then we start to experiment business designing business models um because ultimately it's still a game right it's an interactive exchange between you and the player and uh I start see all the business model as a game design problem to solve,

right? And I start to notice like the stuff I hate. So I will tell you the story. So one day my wife, she only play mobile games. She doesn't play console games. So one day she told me, "Oh honey, I saved so much money today. I spent only $120 on this mobile game."
Oh dude. Yeah.
You can't imagine the rage in me building. I was like, "How did you spend $120?" like and and she said, "You know, I've been playing this uh Best Fiends." Best Fiends.
I was on the board of that company.
Yes. Uh and said she said, "You know, I've been playing this game for a while. I never paid, but every now and then they will surface this this this deal for buying gems or something."
And this one day it shows up to say they have a 90% discount.
Yeah. Yeah.
If I buy it, I can save 90%. That's such a good deal. So, I spent 60 bucks. I bought it. But then it pops out another window says there's a chance I can buy it again. Otherwise, in 5 minutes, I

would never be able to get it. So, I was struggling, but I think it's still a good deal. So, I bought another 60 bucks.
Wow.
This might have been after we exited the company of Play, but wow, that sounds well. Well executed. Yeah, I know.
Yeah, that sounds like a play.
Yeah. Yeah. I'm like maybe bet maybe there should be people around
right and and u you know I heard from Silicon Valley that you it's a joke right it's like the investors are driven by the greed and the fear of missing out
right right
and that happened to my wife and she doesn't seem to have trouble with it she said well it's way cheaper than a pair of shoes
you know and so that's the end of that conversation but anyway I I was like you know uh I understand how much how much work people have to put in for someone to pay 60 bucks to buy a game. But at the same time, I noticed my wife isn't even bothered by this action she did.
You know, I mean, if you did spend the

money, you would justify your choice. You would not like to suddenly admit you take advantage of. She's like defending for her choice.
Yeah.
Yeah. So that was the point I was like I can't imagine if I do this to a to a player you know whose parents will be like me and if if my daughter is doing this I'll be pretty mad at this company.
Mhm. Mhm.
So so that's that's when I start to really start to think about you know all the business models that I've been paying in life how I feel about these models like this is not honorable business. And then I was thinking about like my subscriptions, right? Because subscription was the time the thing that Apple was talking about adding to the app stores. I bought this uh kind of um rowing machine during the co.
I got one.
This is Yeah, this is way later. Right.
And uh one day I realized I haven't been using this machine for two years and I've been paying a lot of money to this

subscriptions I forgot about.
Right. And so I was trying to cancel it. So I was going around on my app. There's no cancellation button and uh there's no contact number either. I couldn't find any way to talk to them. And then I went online to look for it. They it's not on their website. It's not in their Q&A. It's in one of the deep thread somewhere. It sends you a link to go to this page. It's which is on a UK website. It's not even.com.
Yeah.
Right. and then you can go there to cancel your your subscription. And I just feel very angry doing that. And so I start to pay attention every time I spending money. Do I feel good about spending or do I feel bad about spending? And so then we were we were looking at, you know, some of the spending that that actually feel pretty good about.
But you said your wife felt good about the 90% discount. It's just that if you were the parent, you wouldn't have felt good.
Exactly. Just like your kid would be

happily pulling Gotcha for $2,000.
Yeah. Yeah. Totally.
So, I'm mostly thinking from the parent perspective.
Okay. I see. Yeah. Because there's like two people, right? There's the actual player. It's like, do they feel good about it? And then there's the
the moral arbiter who is the parent, right?
Right. So, so there's recently someone had a really good name of it. It's it's like I actually forgot the name. It's like about shadow practice or something like shadow tactics, you know, stuff like when Xbox Live Arcade don't tell you exactly how expensive uh uh something cost, you have to do the mental gymnastics to calculate how much coin of that is.
There was a time Steam will charge you, you know, only the the the square numbers and the change will have to be kept in the wallet. People always call it out because you know if you're a designer and if you're aware of uh every choice people make it has intention

behind.
Mhm.
They could have not keep the change, right? And why did they keep it?
Mhm.
And that intention is malicious. So, you know, I I I certainly am aware why not everybody is sensitive to those designs. They're just like, "Oh, that's the way it is." So then how do you balance sort of both you know obviously you have company and employees and all that versus
you know what's sort of the best you know player experience.
Yeah. So then I start to look for what I consider as honorable uh business way of exchange right it's interesting that there's not many good examples because the society was filled with with uh with malicious or predatory practices. Uh there's so many uh so one time I walked by a gene uh this is when I was much younger. I walked by a shop and outside the shop is they sell jeans, right? So they say buy one, get another

one for only 50%.
Mhm.
And I was like, "Wow, I can buy one and get another one basically free because I'm paying 50% the cost." And so I went in I I spent time to pick two pants right at and I bought at the counter and then they charged me 75%. to to take two two pants. I was like wait I thought this is going to be 50% discount. They say no you didn't read it right. You buy one to get the second one 50%. But at that point I'm already at the counter. There's a bunch of people behind me. I'm like do I just give up on all the time I put in there to choose the pants? I still paid for it, right? I mean, anyway, there are many tactics people do to to make you feel uh there might be a better deal, but at in that very case, it's misleading.
Mhm.
Anyway, so I start to remember how I feel about each of the purchases and which one I actually feel good to

share with others. Certainly, people will tell you, oh, how much they've bought a, you know, engagement ring for their wife, right? I've heard many people say, "Oh, they take their entire family to Disneyland and spend the time at Disney hotel. It's expensive, but they think it's really worth it."
People when people spending the money for others that the people they care, they usually very proud and very happy about the spending. But when people are cheating, like I have a friend who played Candy Crush and she paid her son to uh actually play better who's played better than her to play and she said, "Don't tell any of my friends."
Wow.
I paid my son to do it for me, right? Cuz I want to stay ahead of the other of my friends in my Candy Crush competition. But if you think about most of the spending in this competitive pay to- win game, like would you tell people that you actually cheated or not cheated? You paid your way to get it there. People know it's a shame for spending, right?

It's guilty pleasure. Anyway, because what we are trying to to make game for is for a family and I don't want a family to pay for guilty pleasure. Imagine you're in Disneyland, right? and uh somehow you you you spend the money to get like a bigger hat than anyone else who who has the Mickey hat. That that's just like you know like why would you do that right? Uh and for a very long time it is totally fair in Disneyland if you want to get a fast pass you just go standing to get a fast pass ticket. But after co they charge people who has the money to get fast ticket and I think that is really bad because you create a class difference in this in this one place where the happiest place on earth where you where for a moment one moment you can remember that you're poor right and now you have the rich people skip the lines in front of you all the time
right right
but I understand why why they did it cuz

they almost they almost bankrupted during co, right? They're trying to get the money back. Um, but it's just not a good outlook for Disneyland.
Well, going back to Kevin's question, what are what are some of the more transparent tactics that you've had that balance balance it for you?
I have a friend who used to work at Disney. So, I I was like, hey, how does this is before COVID, right? I was like really I feel very happy spending money at Disneyland, right? Yeah, I understand the the food is more expensive there, but I feel like the experience makes that food deserves it, right? And it's also based on theme. So, I never complained about the price. U So, I was talking to my friend at Disney Imagineer. I was like, "How do you guys design all these like monetizations? Like, you guys really kind of seem to understand how to do it properly for family." So, he told me some interesting story. So he said, "Yeah, we do a lot of R&D on monetizations from Disney." Not surprising, right? Um

and he said, "Um, we have tried this version because we noticed when one time when we do a charity event where where if we spend the money to buy some things for a much marked up price, but we want to donate like 50% of the proceeds to help uh the the Children's Foundation, right? it actually outperformed the normal sales. So this this one thing happened to them. So they were like okay is there something here that that charity actually makes people want to spend more right? So they start to do all kinds of experiments. So, so um they tried a version where imagine if you go to a museum, a lot of museum these they don't even charge you for tickets, right? They just have a donation box in the end. So Disney first tried that. You you take a roller coaster ride and the photo is free. You just get your photo, it's free. You can donate however much however much money

you want. But the outperform is worse because uh some people would be cheap. They were like, "Oh, okay. Well, originally the t the photo was 10 bucks. They just put in five bucks, right?"
And the next people coming on just say, "Okay, that person put five bucks. I will just put four bucks, right?" So it's like uh it's driving to the lowest.
Mhm. Mhm.
It's free, right? So that didn't work. And then the next thing they tried is to add some suggestions. You can see this in some of the public museum as well. Also, just price is 10 bucks, but you can pay 15 or five,
right?
And most people will pick 10. That's the original price, but every now and then there's some people pick five, right? So, it's still not actually selling equally well compared to when it's 10 bucks.
Mhm.
And eventually they try to do it so that 50% of the proceeds goes to charity. Suddenly they are actually getting a better performance because the the

parents who donate for 10 bucks now it's the next parent and the kid is like that how much we should donate and so then they usually mark up rather than mark down because the parents think if we pay less it's kind of less impressive to the kids and so that business model end up doing better than the standard business model. That's a research they published in the paper in Disney. So what I learned from that is that people would actually want to pay if they believe it is indeed to help somebody and very proudly and feel good about themselves. So that's why for a very long time when we're working on the reinventing the business model in Sky, we're trying to figure out like how can we make people feel good about buying something,
you know, and it's about al altruism. Um, and so we made a lot of the items in Sky you can gifting to others or you can buy it at a at a discount but share with

others. I'm sure you guys have played uh Borderland
and when you buy Borderland you can buy a Borderland pack of four to share with friends, right? And I did that with my roommate. We like hey you can get these two for the cost of 1.75, right? Like why don't we just buy it together and we play together. Um, and so we kind of start to like in encouraging player for gifting and we really made it so you can pay exactly the price of the dollars. We don't even use a virtual currency. There's no gems in our games, but you can directly gift it to your friend and in person. Um, and so even though usually we have a singledigit conversion of paid users in our community, but if you take into the gifts, it's a it's a three times the purchase.
Wow.
That's what I learned from the Disney research paper is like, hey, if you really build connections of players and if they want to spend for each other, they feel really good about it. I'm

curious. Do you have any like stats on how you guys monetize compared to like a like one of the more extractive G? Like does it does it perform well or does it make you feel good? You know, is it both? Like I'm just curious.
So I know for sure because I've talked to many CEOs in the game industry. They tell me before got gacha and after gacha it's four to five times difference on monetizations. So you have the same game before you do got gacha. Let's say you make a million dollar after gotcha will be $4.5 million.
Uhhuh.
They can turn it on, they can turn off. They can see the difference.
Yeah. Yeah. Yeah. Yeah. Uhhuh.
So I don't think we can ever do 400% with gifting. We're seeing more like 22% um you know with gifting. So I I guess maybe the idea is like you better long-term retention because people feel better about the purchasing and you feel better about make working on the game. Obviously you seem to have found like a good

balance of commercial thinking like we have to do this because Apple said we can't make a sustainable premium game and uh at the same time like we want to come up with a model that it doesn't feel like we're just extracting value and making people feel terrible.
Yeah. Certainly I I grew up here in the west, you know, learning making games. I know how the western culture think about loot boxes,
right? Yeah.
It's definitely in the morally gray zone.
Yeah.
Um and so I inher that that value as a western value. So when I first go to Japan because Sky is huge in Japan.
Yeah. Yeah. Yeah.
I naively asked them. I said, "Hey, how do you guys feel about all these gachas in your game? Don't you feel bad, you know, that you're basically doing a pseudo gambling with your kid, with the kids there? I said, "What are you talking about? We grew up with this thing. Everywhere on the street is gacha machines.
This is just fun, you know, like you can't waste $1,000 in a gacha machine cuz Yeah, it's true. The gacha balls are

just a couple coins each, right? Even if you buy the entire gacha machine, that's less than $200,
right? So, so they felt like this is just a part of their culture. They don't think it's bad.
Yeah.
And then I learned to not to bring this up again with Japanese developers.
Right. Right. Right. Right.
But then I went to China. I think, okay, yeah, this this is this is something that I remember when I was a kid growing up in China, they're selling these little collecting cards. Um, and even in the instant noodle packs, there's like a random job of cards collections. And I remember it was it was banned by the government because they say this is too close to gambling
and it was all banned because all the kids doing is they're playing with these paper cards. Guess what? Now,
anywhere you go in China, there's guta machines. And the kids are the company that prints out these little cards for little pony collector cards. uh they

made $9.8 billion dollars last year and they their their operation margin is 99%.
And they are only targeting children in the elementary schools. All their cars are sold right in front of you know elementary schools.
Mhm.
And I was just like I remember the government banned this now why is this thing back and these are now company that's going IPOs.
Yeah. Yeah. Yeah.
So I I don't know. I mean, it's certainly uh mind-boggling for me. Um
I was just thinking like when you cross cultural barriers, it's sort of like where does your moral compass even come from, you know, at the end of the day, right? Because everybody has a different view on what
Yeah. It's really funny because uh in in China there's these like uh company that sell collectible toys in blind boxes,
right? So when they approached us, I said, "No, I don't want to do it." Cuz it's very much like the loot box. We we imagine how much effort we have to keep those things from our game. If we then

release a loot box toy for based on our IP, then people think we're hypocrites.
Mhm.
But then the other day in Japan, we worked with Namco Bandai on one of one of our IPs. It's it's actually sold in the gacha ball. So, but I was told like NO Bandai is a great IP company, right? And if you want Japan players to know your game is big, you want to like show up in their shops, right? It's a great like publicity.
Mhm.
But once I realized it's still gota ball, it really makes me feel like, oh like what did I just do, you know? Uh anyway, I'm just sharing some of my frustration
and struggles to to keep these, you know, predatory monetization out of the brand, you know. I mean, look at PopMart, you know, it's open in the in the US now, too. Look at Lapu and all those things. Yeah, it's
Yeah. It's almost like I'm curious from

a Is that the cultural movement that we're seeing more and more of, right?
Do you hear what uh Warren Buffett said recently as he retires?
No. What did he say?
He said the world is going down like you United States used to be a church. You know, it's just on the side of the church. There was a casino, but now we have to keep the biggest challenge is to keep it from turning into a casino without a church. Challenges with with the engineer the the the CEOs have bet they they I ask asked them, "Do would you let your kids to play this game?" They said, "No, but why are you making it? If you can make money without using this tactics, why aren't you doing that?
Right?
The the CEO's response is because everybody's using that. If I don't use that, I couldn't even acquire the users and I would die. The company will fold. So, I'm happy to not use it if you can tell the government to tell everybody you you're not allowed to use it.

Yes. But to survive in today's economy,
right,
I have to do the necessary evil,
right? But yeah, I guess like going back to what you guys have done, it seems like y'all have been fairly successful without or at least trying to balance.
Yeah, I I feel I feel lucky. Like I said many times, I feel very lucky that we didn't have to use the predatory methods and still keep the company afloat. But do you think part of the success was that you made those conscious design decisions though?
Honestly, I don't think so because our players still complain our item is too expensive because they can see the real price, you know. So they were like, "Look at other games. They only take $2 to pull and you're selling me a shirt that's $15. I could buy a shirt in real life with $10." That's the typical conversation,
right?
Yeah. They're they're not doing the math times 20 over

so we're doing the honorable work and they are they are complaining about the real price right and but I I saw in the news recently that the ga impact in the west has been forced to show the real price of the high gacha pools those stuff are like $475 each
you know so the fact that in China these are now enforced right it's a low price and people are complaining about selling for real for us. That's the world we're living in.
Well, I guess it's even more impressive that you guys are so successful in China, too, where this is like probably the norm more than anything.
I feel like Yeah, we were we were lucked out to be honest. We were lucked out and we were not successful in China initially. Uh we we're getting a lot of interest in Japan right away,
right? And there was almost a year that our daily active user in China is way lower than you know like like western countries.
What do you attribute that to in terms of the the success?
Typically in the mobile industry if you

looked into their business model the game that rise to the top have solved the user acquisition problem. Either you have a game that's super sticky like Candy Crush, right? It's super sticky. Uh and then all you need to do is just to get them in and um they would play forever and then they use social network, right? You add the game and you you your friend is on the social network, you can now use the uh Facebook or other social network to create stickiness and competition between the friends, right? Or which is like you're charging not much for each players. Each spend is a couple dollars. or you have a game that's really hardcore, but it's going to have less than 1 million daily active users, but you charge them so much with Gacha Plus, you know, competitions, then you can afford to pay tens to hundreds of dollars to acquire a user. I talked to one person who is working on one of the top grossing game right now. I said, "How much is your top player paying?" He said, "$25 million."

What the heck? Yeah, that reminds me of all the like World of Tanks and like you know all
I mean I've heard a lot but not 25 million.
Not 25. True. Not 25.
And I was like what kind of person is that? Why would people pay that much money? He said this person made this decision carefully. He actually works in he was a successful entrepreneur and he did the calculation in order to join the real political party and to earn that power like a king uh he has to pay a lot more money.
Yeah.
But for the same amount of money, $25 million, he can feel like the king uh to to be in this game.
Yeah. Hey, it's value to him. Yeah. again like the people who pay the money will rarely have remorse,
right?
Mhm.
So they can afford to continue pay, you know, the top money, the Super Bowl money to to get these people. Um, but if

we are a game where our revenue per user is reasonable, like I said, like I I'm totally happy if a player pays 60 bucks for the game we made,
right? So that's the t the lifetime value I'm thinking about is if if he paid 60 bucks that I think I did a good job to justify the entertainment value
that basically makes it impossible for you to do user acquisition uh like just buying ads.
Uh and you can't rely on just people telling each other just to grab a game as simple as Candy Crush. So how do you moni how do you uh really solve the UA problem for a lower pool midcore game?
Yeah. The answer is at this point, you know, after we succeeded, the answer is the game has to be socially viral and people wanted to share this game with their friends and they want to share content of this game on social media. So our player become our marketing,
right?

And that that seems to be the only way. I I couldn't think about any other alternatives. So if you have a game, you you just tell your friends, it's still too slow because you can only tell like maybe one class of friends if you're in school. If you if you are a doubt, how many friends do you really have? You know, a handful, it's not fast enough to grow the audience. So the only way the audience can grow fast is you will make a content of your game and post it in the social network. And there's a lot more people who follow you on the social network and they discover this game. And so if your game is not good at creating UGC content, you're kind of, you know, limited. So either your game can charge a lot or your game has natural viral spreadness or, you know, like there's no other way.
So was there one or two channels that really worked for you to get that inflection point in China or you you just have it just occurred naturally across you know whatever thying and way and waying and you know we chat and everything. So the inflection point

initially was in Japan. Uh when we first launched the game, Apple gave us a promotion and we we got maybe a couple million people installed on day one
and u and it quickly die out because the quality of Apple uh user for for games is relatively low, right? And u we lost maybe 90% of the user within the first week.
Then we start to see this thing happening in Japan. It's just like growing and growing and growing like we have no company in Japan. We have spent zero marketing in Japan but it's just keep growing and so I I I take a plan to to Japan in Tokyo in 2019. I was just like what is going on there? I need to I need to go there to see
because I have never been to that country. And to my surprise, the the people who come to see meet the developers, it's almost like 99% women,
which is a surprise I have because like

I have Journey fans in Japan. There's a lot of many people who play Journey, but it was not the console players. So I asked them like, "How did you find out about this game?" they say, "Oh, I follow these like bloggers uh these Twitter uh post people like there's a huge like uh fan art community uh in Japan uh because a lot of the women who go to have high educations in school, but once they get married, they still go become full-time housewife. It's a culture in Japan.
You actually have a social pressure if you actually work uh in Japan, which is not the case in America or in China. So, it's these highly educated uh full-time mom. They stay at home and their kids are going to kindergarten. They actually have a lot of time. So, they pursue like create creativity, right? They make arts and fan arts and they become like the the the content creators on the internet
and so they played our game. Uh you know, our game tend to be of emotional

storytelling and really touch people. So, they were they were moved by the game. So decide to make fan art about this game and they have a big following, right? So it's like the the initial content creator who likes to make fan art made fan art about our game and so more people is like what is this game? So they they all start to install this game and we also discovered why we were not successful until like a year later because we launched on iOS only. If you think about like viral like if you tell your friends, hey get this game on your phone and he's like no I have Android. Yeah,
that's the end of it. But in Japan, we were lucked out because 86% of Japanese women choose to use iPhone as their phones. So, it's the only country that managed to have more than 70% of people ready to be viral.
Okay. Yeah.
And that's why we were only successful in Japan and that's the only country that's growing like quickly. So, so then we realized we have to we have to really

kind of port it to Android as quick as we can,
right?
Uh, and so for China, there's they have so many different type of Android phones
with all kinds of different foreign factors and many of those phones are very crappy. Uh, and so it took us a whole year to port because certain, you know, popular phone in China will crash. So yeah, almost a year later when we launched the Android, our day one DAU has changed from like 250K to 3 million in one day.
Wow.
I mean the other thing we learned is even though it didn't viral initially on iOS, people are definitely seeing it. People are talking about it. So when we finally launched on Android, it it it went viral.
Were there any design decisions that helped on the verality side? Was or was it more just like fan art's pretty it's nothing you can really do to embed inside of the like the the loop or

anything like is it more so that that was pretty organic in terms of like people just like wanted to draw art and post it wasn't like embedded in the game. Yeah, that's that's initially, right? And then we start to think, okay, maybe we should make it very easy for a player to take screenshots, you know, and then we made the screenshots to be higher resolution when you take screenshots in game.
So, it's much nicer to share it, right?
Uh, and then we decide to add videotaping cuz our player was like, "Hey, I want to I want to record video, but this UI is too annoying, right?"
Yeah. Yeah. Yeah. Yeah. So we made it so when they record videos the UI is uh invisible in the recording. Uh and so then we start to see people uploading more like videos online and I think one of the video went uh viral just some random people playing the game and that thing went viral and then a lot of people start to wanted to get this game. That feels like a a huge kind of unlock

takeaway for people that don't want to just go down the monetization route. Just like thinking about viral social game design in terms of how you you know kind of master that,
right? I mean that's that's the that's the initial right and then there's retention. If you cannot retain them, it's still a problem. If we can close maybe what is one last one you know it's been what 18 19 years now you know company has done extremely well big funding rounds and you know obviously very successful titles and IPs do you sort of see this as a lifelong thing or or sort of what's next you know for for that game company
for a very long time we were hoping to earn respect for the game industry that's why we started the company you 19 years ago, some fans write an email to say, "I never thought games can be a positive thing for life.
Uh, you should make a commercial company so the world knows gaming is not just

violence and competition and and addiction." That was 19 years ago.
Wow.
So, I started a company making art games and I hope that this would change people's view towards the media that we love and grew up with. And I see a big movement in console industry honestly like all the AAA games are now very it's art.
Yeah.
But then this uh microtransaction free-to-play business model suddenly just started everywhere. And nowadays when I talk to people again they you know they were like how much money do you guys make? I heard you guys make a lot of money. That's that's what people ask me when we say we make games.
Yeah. That's not what I want people to think about the game industry. So you know I was thinking like what what is it what does it take for the industry to earn the respect like the film like animation television when did they earn the respect it's always when they launched this a very successful

uh four quadrant like you know everybody can enjoy it come with the high production value and technological innovations and the most important it touch people's uh humanity and then people are like, "Wow, this is this is respectful." Right? And uh I I think that the game industry has many great games already for different demographics, you know, the adult man, the adult female, the kids, but there hasn't been a game that the the whole family can enjoy together and afterwards they actually become closer to each other and their life become better. You know, they they're all inspired in different way. And I think if we don't have that uh we can't convince the majority of the society this is a respectful industry. Mhm. Mhm. So I was like that's when Disney made Snow White that changes people think about Looney Tunes, you know, when Pixar made Toy Story that

changes people think about VFX and computer graphics,
right? So what my hope is that we can try to build something that is near close to the emotional power of like a Miyazaki film or a Pixar movie that can bond men, women, children, boys and girls, dad and mom, you know, can all play together. And that's the only thing I felt like the industry is missing because otherwise you have a game for any demographic at this point. the thing that can unite all of them together.
And certainly if you bring them all together, you can't be selling them gachas. That's that's how I like I'm like back, you know, usually you start from the end. You're backwards, you know, like you think about, okay, what do you have to do to earn the respect of a family? Yeah. That that's what we're trying to do with with Sky. We we were trying to hit that target, but we lost the boys. The it's all the girls and their parents. The boys are not interested in a game where there's no

competition and achievements and battle,
you know. Um, if you look at Disneyland, the sky is very much like the the small the the small world ride. Disney Toontown, you know, it's a very
Yeah, it's fairy tale, right? But
boys are not interested in fairy tales. They're they're interested in adventures. They're interested in frontier. They're interested in Space Mountain. not Disney Towns. So, so I think that's why Sky is only a three quadrant game and uh so we're working on our next game. Hopefully uh we can actually get the whole family.
That's exciting. What a mission. Wow.
I know. That's a that's a I think that's a great way to end and obvious we're all rooting for you to to change that perception.
Absolutely.
Calm down the luck. So
Yeah. Yeah. Yeah. Yeah.
Yeah. There's luck beats preparation and vision. Absolutely.
All right. Thank you very much. Yeah, it's great talking again and uh hope you have a great week.