FIRESIDE CHAT: From PlayStation to Indies | Jack Tretton, Interviewed by James Brightman

Well, I think I started out like probably most of the people in this room and most of the people in the industry do, just being a gamer and being a fan of gaming. When presented with an opportunity to get in the industry, I thought, wow, there might be a way, at least for a little while, to make some money doing what I love. I never dreamed, back in 1986, that it would be my entire career. I think it's grown from something that was perceived as a fad or a toy or something strictly for males up to age 17, to mainstream entertainment. It's bigger than box office and the music industry combined, and it's an industry to be reckoned with. I'm just pleased to see that it's finally getting recognized for the art form that it is.

Well, I think one of the things that can happen, and definitely happened to me, is you get caught up in what you're doing. My world for the better part of 20-plus years was the console industry, so the world revolved around the console industry, and not only the console industry but one console. I've really enjoyed over the last five years appreciating the depth of gaming and the fact that there are people involved in every different format, every different genre, and there's new stuff coming all the time. It is just this blank canvas that is a long way from being full, and there's endless potential in it. It's just a matter of people's imagination in terms of where it can go.

Well, the platform launches are probably the coolest thing I've ever done. The first platform launch of PlayStation 1 back in '95, the excitement around that. You work tirelessly for a couple of years leading up to it, not really sure how it's going to be received, but you get there on launch day and you see the enthusiasm from the gamers and you really feed off of that. This will be the first platform launch that I haven't physically been involved in since then. That's the bad news. The good news is I don't have a dog in the fight. I can really just watch what's happening and get excited about all the different platforms as a developer and as a gamer. So I'm excited about that.

Yeah, it's a little bit of both. I did have a big dog in the fight at that point. You play to win and you fight for the team that you're playing for, but it really is a business. It is a war in the sense that the success of another company might come at your ability to accomplish your goals. But in the end, we're all citizens of the industry. I've said many times, a rising tide lifts all boats. While you don't want competition, competition is what grows the industry and makes everybody better. Outside of the corporate structure, everybody in the industry is pretty friendly. I've probably spent a lot more time with Microsoft over the last five years than I have folks I used to work with at Sony. I remember the first few times I walked in the building and people kind of shook their heads and smiled a little bit, like, 'Man, you killed us at that E3.' And I'm like, 'Sorry about that, but I love you guys.' We were all friends, but it's different when you walk in the building of a company you compete with. Now you're looking for their support, you want to be involved in their platform. I think the people at Microsoft in particular are great, and Nintendo has been around forever, so you always have a relationship with them. The great thing about being chairman of the Entertainment Software Association was that we put the industry first and individual company second. I took my Sony hat off every time I was involved with the ESA, so it went beyond corporate borders.

Well, the world I grew up in was like the movie industry was for an extended period of time. There were major studios that had all the dollars and all the development budgets, there were major retailers that controlled whether or not your game ever got on the shelf, and everybody was beholding to them. It really limited the creativity and the business opportunities. With the advent of the digital age and indie developers, you saw the number of triple-A publishers decline, you saw a narrowing of the focus among the triple-A publishers going into less and less big-budget games that they could really sell a lot of episodic content on. With the ability to sell digitally direct to the consumer from the stores, really anybody could be a publisher without having to be beholding to a major retailer or a major studio. I think that is the biggest difference to happen to the industry since I've been in it. There is really just an endless amount of opportunity for a creative developer. I was really attracted to that because there's this huge pool of talent that has incredible ability, but in a lot of instances they haven't had a lot of experience bringing a product to market and all the pitfalls that go along with raising money and making a game successful. I thought I could help in that area, and that's really what I've been focused on the last five years. I'm enjoying every minute of it.

Yeah, I experienced a lot of things I think any developer goes through. We started with a small fund that was a special purpose vehicle raised with a bunch of investors focused on one studio, and then we decided to go out and raise a much larger fund. That brought in agents and investment banking. I realized through that experience, about a year or so, that I was going to spend more of my time raising money with investors than I was with developers, and that's much less attractive to me. So I think the first key, and the thing I learned, and I think everybody in the development community learns, is it's a matter of finding the money and finding the money from the right people, people that are going to be aligned with the same goals that you have. Then I think the other big key is you've got a development strategy, you've raised your money, but are you thinking about your go-to-market strategy and what happens after launch the entire time? Or is it something that, because you've been heads down trying to get the game finished, it's kind of like, 'Chip and duck, what do we do now? The game's on the market, how do we maximize its sales?' Those are the areas where I think there are big pain points, and those are the areas where I try to lend assistance to any developers we work with.

I think everybody has a unique set of skills, and everybody, unless they're an egomaniac, has their weaknesses. The key is to surround yourself with people that can help you with your weaknesses and really bring out your strengths. I think it's just finding out what you like and what you're good at and try to align yourself with people that can help you in areas where you're deficient, and do it without giving away the store. Because if you give away points to everybody, you realize the game ships and you don't own any of it. You got a lot of help and the game was a success, but you're broke. So you've got to really make sure that you get value for your relationships.

Well, I think there's a lot of different ways of doing it. The perfect world is to have some degree of a relationship going in and some degree of familiarity. Whenever Sony would acquire a studio, we typically did an external development project, gave them an opportunity to understand the culture, gave us an opportunity to understand how they work. That's kind of difficult to do in the indie space, but we're looking for long-term relationships. We're not looking for one and done. We're looking to get involved with a developer and ultimately say, 'Okay, if this works out, you never have to worry about raising money for your next game.' We're looking for people that are in growth stage. Unfortunately, I think it's difficult to work with teams that are just forming and putting out their first game, but it's also probably not a target developer to get with somebody that's been doing it for a long time and already has an established culture. We're looking to get that team that's on their second or third game, has had commercial success, but is looking to build from there. Then we want everybody to be aligned. There are a lot of investors that are going to make money all along the way. There are a lot of teams that want to make sure that they're pulling decent money out of the development budget while the game is being built. We want everybody to be aligned completely: the development process and the investment stage is the pain point, the success of the game is where everybody reaps the rewards. We all win together or we all lose together. There's no way that the investors come out ahead and the developers come out broke, or conversely, that the developers were fat and happy and started three projects over two years and all our money's gone and we got nothing to show for it. So you've got to be aligned, and there's a million different ways to do it. It's just finding the investor and the team that's right for everybody.

Just who you take money from and how you take money. A lot of times, young teams raise money within their family. When it comes time for a milestone payment, they're like, 'Yeah, we're running a little bit behind, but we need more money.' And you're like, 'Well, that's not going to work. The contract says this payment is based on that milestone.' They say, 'Well, my mom was always pretty forgiving about it.' I'm like, 'Yeah, well, I'm sure she was, and I'm sure she loves you dearly, but unfortunately our investors are looking for a return, and it doesn't work that way.' Conversely, you've got somebody who desperately needs money and they take a deal, and they realize there's management fees being stripped out and they said you have the amount of time to work with, but they're trying to get you to flip your studio and they're squeezing the money out of you because they want a quick return. You realize that they weren't in it for the long haul, and you took money from a partner that probably was not the best choice. So that's the biggest pain point: being aligned day one. If you're not aligned going in, you're definitely not going to be aligned coming out.

I think from a technology standpoint, it's very exciting to think that you could stream a game without latency direct to consumer. I think those technological hurdles will get cleared, if not already been cleared to the point where it can be a viable format. The biggest thing that I'm looking forward to understanding is the business model. Because I think any type of streaming service or any type of catalog subscription download is great for games that have kind of run their lifecycle, or part of a selection of games that you can play when you have some spare time. But if you've put your heart and soul and development dollars into building a game that you want to take to market, and you have opportunities on every platform to monetize that for whatever price you're selling it at, how does that work as part of a cloud gaming service? What are you going to pay the developer to have the right to their game? Because if I can just sign up for X dollars a month and play that game to my heart's content by streaming it, why would I buy it on another platform? So as a developer and investor, I've got to see a business model that says this is as profitable and not a threat to putting my game out on console or PC to bring it over to a cloud streaming service. To me, the establishment of that being a viable marketplace for day one releases is when cloud gaming becomes relevant on a level of the console and the PC.

Well, the one thing you can always count on with the launch of any new generation is that people predict it's the last generation of console, and it hasn't happened yet. So I don't think it's going to happen in this generation. Ultimately, the machines can go away and you can stream content directly to consumers and it all works out great, but at the end of the day, most people aren't doing this as a hobby, they're doing it as a way to make a living. All gamers would love everything free, but at the end of the day, you get what you pay for. To get great games, people need money, and to be able to continue to make great games, they need to sell those games and get a return on their investment. So if there's a business model that makes sense and the experience is great for consumers, then great, we'll move on. But people gravitate towards the best entertainment experience, the greatest value for their dollars. There's a number of different ways to do it, and you see most core gamers today play on multiple platforms. So I don't think there's ever a time when there's only one solution for gaming. I think there's going to be choices in perpetuity, and there's more now than there ever have been, and I think that's going to continue to grow.

Absolutely. I think you have to be aware of trends. Halo was successful, everybody wants to make the next Halo. Everybody wants to make the next Fortnite. The best thing is to make the first Fortnite. You don't want to be the 15th Fortnite. If a genre is hot and you have a spin on that genre and you can migrate gamers over from a popular game like Fortnite, that's a winning formula. But I don't think you want to react to trends. I think you want to try to be there in concert with them, or ideally set them. The thing is to do what you're passionate about. There's no way to look at it as a math formula and go, 'This is what makes money, this is what we need to do.' You need to do what you're passionate about. Following trends is really chasing money, it's not chasing innovation. Innovation is what has always driven this industry, and that's what will continue to drive it.

I think again it comes down to culture. If the culture is that you're forced to do it because if you dared go home at a reasonable hour you'd be shunned by the rest of the group and the company, then you're probably working for the wrong company. But I think especially in the indie space and for people that are really passionate about gaming, they're putting in the hours because they're passionate about it and it's their favorite thing to do. If that's what drives them, I think that's fine. But if they're in a culture of pressure where they're forced to do more than their fair share relative to expectations, they're probably working at the wrong place. Work-life balance is important, but I don't think it's that big of a problem in gaming in terms of forced work. It's more that people in the industry are so consumed by it that that's all they think about 24/7. I felt guilty that there's something going on in the world 24 hours a day. You wake up in the middle of the night and you say, 'I'm not going to pick up my phone,' and then you say, 'Well, I'm just going to look at it for a second,' and next thing you know you're working 24 hours a day. I think that happens. But everybody tries to find a way to listen to their body and shut it down when they need to. I think the people that are really passionate about the industry are comfortable with it.

Well, the grass is always greener on the other side of the fence. There are times I miss the big teams and the big budgets and the big show. I've done that for a long time. You never say never, but it would have to be something that I was absolutely passionate about with a team that I was absolutely passionate about, and to leave something that I'm completely passionate about, I can't envision it. But the thing I learned in this industry is that it takes turns pretty quickly, so you never say never. But I think the indie space and being independent myself is where I'm most comfortable at this stage of my career.

Well, one of the trends I think we see is everybody was going for the biggest graphic depth of gameplay experience, so you had to have the most powerful PC or the most powerful console out there. I think now cross-play and portability is something that's really important to people. Ultimately, it's about the gaming experience. People are trying to find a medium that will allow you to get as many gamers involved across as many platforms as possible. In many instances, social games will see the technology bar coming down. But I also think that there's somebody that always wants to push the technological barriers and have an experience unlike you've ever seen before. So I think there's going to be a real variety across the board, and we're seeing that now. I just think it's really difficult to be everything to everybody. You can't be Fortnite and be this high-end dedicated console game at the same time. You've got to choose a path. I think it's difficult as a studio to try to have a foot in every one of those places. We've got one mobile game in development, and it's a real diversion from what we do. I'm learning a lot, and that's part of the motivation for it, but it's a completely different world from the PC and console space. So I think it's find your expertise, find your passion, stick to that, and there's more choice than ever before.

Yeah, I think it's a relatively small industry, and if you don't know somebody, you can find people who do know them. So ask around and do your homework a little bit. If they've never invested in game development before, do you want to be the person's first foray into this industry? I think anybody who spent any time in this industry knows that it's unlike anything else in the world. I don't really welcome trying to explain the industry to a banker that doesn't know anything about the industry. I did that fairly extensively when we were trying to raise money, and I just don't have the time to educate somebody on the business. So if they're giving you the money, you need to understand what their expectations are, and more importantly, you need to convey to them what is going to transpire over the next 18 to 24 months of development. Communication is really key, and honesty is very key. You just have to hope that you're being 100% honest and you're getting 100% honesty in return. If you've had any success in business, you typically have a pretty good spidey sense, and you start to really realize whether you're getting sincerity back or whether you're getting lip service. That's the key, and that's the key to using outside developers or anything that spends your development budget over the course of the development of the game.

Ark: Survival Evolved was a game I got back involved with back in 2015. Open world survival on a relatively small development budget that absolutely blew up. Got criticized a lot along the way for spending too much time in early access, but they constantly had updates and they've broken down so many barriers. I was really proud to dispel the myth that there are things an indie game can't do. There's nothing an indie game can't do. That game ended up going out in physical form all over the world. Even though the development team had incredible success, one of the proudest moments for them was to walk into their local Walmart store and see it behind the glass for display. We all love having commercial success and having gamers enjoy our product, but to see your product on the shelf right beside Call of Duty and the rest of that stuff, and having commercial success, was a big deal for them. I was really proud to be part of that. We've set a trend where they're doing that more and more. We all love the digital world, but there's no part of the industry that an indie shouldn't touch. So we try to make sure that our successful projects actually get to physical retail as well, and we maximize every opportunity to expose that content. That was probably the most exciting experience I've had, but fortunately it's not a unique one. It's something that we hope to be more the trend than the exception.

Well, again, I think you just have to be honest about the working relationship that's going to make sense. On the developer side, there is more dollars out there than I've ever seen before. You've just got to pick your partner. For the investors, there's more projects out there than you can really afford to support. We've had over 600 submissions to our fund, and we evaluate every one of them. Speaking for our funding, we'd ideally like a team that has published a game that has had commercial success, at least one. One of the other things we look for is what did they do with that success? Did they all go buy Ferraris, or did they pour all the money back into the studio because they were thinking five years, ten years down the road? What do they want to accomplish as a studio? Do they want to get acquired? Do they want to retire in the next five years? What is it that they're trying to accomplish, and how are they trying to get there? Then we share our investment strategy with them, and if there's a cultural alignment and the same set of goals, we go ahead. But it's relatively rare. I think it's rare by choice because it's got to be right. Venture funds expect six projects to lose all their money and the seventh one to do a 20-fold return. We expect all our projects to be successful. While I'd love a sevenfold return, we're just looking for a degree of success, and we're looking for a long-term relationship. So you just got to align yourself with the investor themselves. I think our investment strategy is unique to us. Maybe there are others out there like that, but it's a question of whether you fit with us and whether we fit with you. Like I said, there's an endless supply of talented developers and investors. It's the matching part that's difficult.