Legend Games (5)
I kept going. “An ESD isn’t just a place that sells games. It needs to offer a range of convenience features for users. If you put it in Snow Crash’s hands, I can make it far better than Stream. We’d fix every bug, of course, and we’d also tie it into the store so item trading and streaming would be possible.”
Stream wasn’t perfect, but it was true that among all ESDs, it offered the most convenience features by far.
Scott, the CEO, asked with a look of surprise, “Is that really possible?”
“If you’ve heard the rumors, you already know the answer.”
After the Blackwood incident, Syd had become wildly famous. And fame like that always turned into contracts.
Of course, he was swamped with work even now, but… well, Syd would handle it.
“If you can really do that, there’s nothing more we could ask for. I’ll think it over.”
I changed the subject. “Come to think of it, Nightlight has been incredibly popular lately.”
It wasn’t all that popular in Korea, where it had been eclipsed by Battle Island, but in North America it was taking off like a storm.
Right now, it had only been released for PC and consoles.
“Cross-platform is the trend these days. Why not release it on mobile too?”
Just two or three years ago, the game market had still been dominated by PC and console, with mobile accounting for only around 20 percent.
But by now, that share had grown to nearly half.
That didn’t mean PC and console sales had gone down. It just meant mobile games had exploded in growth.
You could see it the moment you got on the subway. People were playing games on their smartphones everywhere you looked.
Plenty of people didn’t own a PC or a console, but everyone had a smartphone. And because so many mobile games were casual, anyone—young or old, men or women—could enjoy them easily.
That was why mobile had become a market game companies couldn’t afford to ignore.
“Of course we’ve been considering a mobile release. Development is already finished, actually. But we’ve been holding off because of one issue.”
“The app store fee, maybe?”
Scott nodded.
“Both Guble and Enple take a 30 percent cut. If you think about it, doesn’t that seem a little strange? Why is it 70/30, almost like they colluded on it?”
I thought about it for a moment and said, “Well, maybe because 60/40 would be too high, and 80/20 would be too low?”
He gave a small laugh at that.
“That probably isn’t entirely wrong. But I think it started when Enphone came out.”
Back when mobile phones were still primitive, all content was distributed through carriers.
At the time, the carriers took most of the revenue, and the creators’ share was less than 10 percent.
Then, at last, Enple released the Enphone, and the smartphone era began.
“In the beginning, you could only buy apps made by Enple itself. But Enple opened the door and let developers create and sell freely.”
“Taking only a 30 percent cut?”
Scott nodded again.
“Exactly. Compared to carriers and companies that used to take 70 to 90 percent, Enple’s 30 percent policy was practically revolutionary.”
To the serfs groaning under heavy taxes in front of an abusive lord, one day a liberator named Enple had appeared, wielding a weapon called the Enphone, driven the old powers out, and declared that from then on, it would only take 30 percent in taxes.
Everyone raised both hands and cheered.
Low fees were a stroke of genius for Enple, too.
Once developers realized app development could make money, they rushed to build apps of their own, and that became one of the reasons the Enphone succeeded.
“The problem is that the 70/30 split that started then became an unbreakable law.”
At first, the 70/30 ratio hadn’t caused any issues.
But smartphones pushed feature phones aside and became the new standard, while app markets grew explosively. The market became a hundred times, a thousand times, even ten thousand times larger, but the fee stayed exactly the same.
If $10,000 in sales meant paying $3,000 in fees, that was easy enough to accept. The same went for $100,000 in sales and $30,000 in fees.
But what if $100 million in sales meant handing over $30 million?
At that point, questions were unavoidable.
“Doesn’t that fee apply to all apps, not just games?”
Scott gave a derisive snort.
“More than 70 percent of the revenue for both NOS and Andromeda comes from games. In other words, 70 percent of the app store fees they earn come from game companies. That money adds up to more than $20 billion a year.”
That was how dominant games had become in the mobile app market.
People who hesitated to pay for a $10 app because it felt too expensive would happily swipe their card for a $50 cash item without a second thought.
Sure, you might think, if you hate the fee structure that much, just don’t sell there. But to say that, smartphone adoption would have had to be a lot lower.
Mobile games made up half the entire game market.
And yet this market was effectively monopolized by two companies, with no way around it. If you wanted to sell games, you had no choice but to pay 30 percent.
Scott didn’t even try to hide his disgust.
“They’re profiting by exploiting developers.”
“Still, it was Enple and Guble who created the app market in the first place. That market didn’t exist before them.”
“I’ll give them that. Building a platform and bringing people in is no easy task. And of course businesses have to pay fees. What I take issue with is the 30 percent. It’s unjust. It’s far higher than the profit margins of most development studios. Isn’t it strange that the platform company makes more money than the people who actually made the game?”
Most developers didn’t even clear a 10 percent profit margin. Plenty of them made games at a loss.
Even a slight cut in fees would improve their situation dramatically.
“After all, the reason Enple and Guble can make such enormous money from app stores is because of the developers making the games. I think more of that revenue should go to the developers, not the platforms or distributors.”
At some point, 70/30 had hardened into a golden rule. And now it was treated as if it were a law of nature, applying everywhere.
In truth, almost every game company thought the 30 percent fee was unfair, but no one could easily speak up.
Because the other side was Enple and Guble.
It was easy to complain in words. Acting on those complaints was another matter entirely. But Scott was actually willing to act.
In other words, he was prepared to shoulder the burden himself and go head-to-head with Enple and Guble.
He really wasn’t an ordinary man.
“After meeting you like this today, I’m certain of something.”
“Certain of what?”
I decided to get to the point.
“I want to acquire 70 percent of Legend Games.”
The sudden proposal left him stunned.
“Seventy percent?”
“Yes. I’m thinking in terms of a $14 billion valuation.”
That meant I was valuing the company at $20 billion, more than 10 percent higher than Wechant.
The plan was to raise the funds by selling Blackwood stock to the Rush fund.
I had three reasons for choosing Legend Games.
First, they handled everything from game development to distribution to sales. Second, Scott cared more about users and developers than immediate profits.
And the most important reason of all was that they made a game engine. The Surreal Engine would later be used far beyond games, especially in virtual reality.
That was why I had to acquire it and make it ours.
“That’s unexpected. I never imagined you’d actually make an acquisition offer.”
“I told you from the start that I’m very interested in the game industry. I think games are the core content of the metaverse.”
The metaverse was the creation of another reality inside a digital world.
And it developed in two directions.
The first was the virtual office.
It wasn’t just about handling work remotely. In a virtual office space, avatars could go to work, meet people, and hold meetings.
If you could get work done without the constraints of space and distance, productivity could rise dramatically.
That market was already growing quickly simply because companies needed it.
The second was games.
As productivity rose, working hours were shrinking and leisure time was increasing. And the biggest share of that leisure time went to games.
In a sense, you could say games had been realizing the concept of the metaverse long before anyone gave it a name.
MMORPGs were another reality entirely—one where characters gathered, formed relationships, fought bosses, and traded items.
“In that sense, may I give you some advice about Nightlight?”
“What is it?”
Nightlight was an F2P game.
The game itself was free, but users bought various things inside it.
Unlike Korean games, where spending more money made you stronger, the main things sold here were skins that didn’t affect character performance at all.
And yet they sold like crazy.
Players were more than willing to pay for skins and dress up their characters.
“How about making a mode where users can log in even when they aren’t actually playing?”
“Without any content?”
“Yes. They’ve already spent money customizing their characters to fit their own tastes, so it’d be a shame if all they could do was shoot each other. Let go of the idea that the game company has to provide all the content. If you leave it to the users, they’ll create it themselves. They could use the objects placed on the battlefield to build new maps or mini-games, invite friends over to chat freely, play music, and throw parties. If a famous singer held a concert, people could gather there just to watch.”
“……”
He seemed shocked, as if he’d never considered it before.
Later on, when users flooded them with requests, they would actually release a mode like that. Thanks to it, Nightlight would be called a metaverse game rather than just an FPS.
“Th-thank you. I’ll have to look into that.”
“What do you think about the investment itself?”
“To be honest, we’ve gotten a lot of calls from private equity firms so far. But I turned them all down.”
“Why?”
“Private equity sells its stake again later, doesn’t it?”
I shook my head.
“Don’t worry about that. If anything, we’re more likely to invest further. We have no intention of exiting. And if it still worries you, we can add a condition that any resale of the stake must get Legend Games’ approval first.”
But he still looked troubled.
“From our side, we also have to consider the synergy with the investment firm.”
“Then all the more reason to team up with Continue Capital.”
“Pardon?”
“There are three reasons. First, we’ll invest, but we have no intention of meddling in management. You can keep running the company the way you want, just as you do now.”
Well, that probably wasn’t all that attractive, since Wechant would be the same way.
I kept going. “Second, we own Snow Crash. As you know, Syd Lucas is the CEO there, and it’s a cloud company with Mimir, the most powerful artificial intelligence program around. Snow Crash can make sure games run perfectly in the cloud. Right now that applies to Nightlight, and later it could include every game sold on Legend Store. That way, you wouldn’t have to worry about PC performance or storage space.”
Scott was starting to show real interest.
“And the last reason?”
“If you’re planning to go toe-to-toe with Enple and Guble, I’ll support you with everything I’ve got.”
“What do you mean by that…?”
“Am I wrong?”
“……”
Because I’d seen right through him, he looked a little flustered.
But soon he was looking at me again. “If you really did that, though, you could take a massive loss.”
Enple and Guble completely dominated the mobile market. If you slipped up even once, you could be pushed out of that space altogether.
But…
“The ones who’d take the loss would be Enple and Guble. If you team up with us, I’ll make sure you win.”
At that, Scott’s eyes lit up.
“Really?”
I said with confidence, “I don’t play games I can’t win.”
After a long silence, Scott finally spoke.
“All right. I’ll accept Continue Capital’s investment.”
I smiled.
“I look forward to working with you.”
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