Reflecting on the Risks and Rewards of Investing in New Gaming IP

In the high-stakes video game industry, where budgets are rising and expectations are soaring, investing in new and emerging intellectual properties can be a daunting financial risk. While some new games like Helldivers 2 and Palworld achieve fame and success, others such as Immortals of Avenum struggle, with the latter's developer Ascendant Studios reportedly furloughing most of its staff. Acquiring an existing franchise's legacy is not always a guarantee of success either, as seen in Embracer's restructuring efforts. Saber Interactive CEO Matthew Karch highlights the opportunity to create great entertainment at an affordable price with the upcoming release of Warhammer 40,000: Space Marine 2. To gain a deeper understanding of the current state of the gaming industry, we spoke with Mike Fischer, the former CEO of Square Enix of America, who has worked on both established IP and new titles. Fischer is now a professor of Interactive Media at USC, where he teaches sound business fundamentals to aspiring game developers. He emphasizes the importance of understanding the intersection between market opportunity and developer vision, citing the success of Palworld, which reached over 25 million players in a month. However, building something new at that scale, especially when existing franchises are doing well, can be a significant challenge. Fischer notes that different organizations within a company can have conflicting opinions on publishing experimental games, which can hinder the development process. He points to Quantum Conundrum, a puzzle game directed by Portal's lead designer Kim Swift, as an example of a game that was not allowed to reach its full potential due to limitations and requirements from the larger global organization. The rise of subscription services like Game Pass or PlayStation Plus has created a new discovery avenue for emerging IP, which Fischer believes is crucial for the success of middle-tier games that are not small indies but also not AAA games with massive budgets. He cites Squanch Games' High on Life as an example of a game that found success through subscription services, becoming 2022's biggest Game Pass launch. Fischer's current role as a professor allows him to teach game developers the business fundamentals they need to succeed, emphasizing that understanding the business dynamics of the industry is essential to achieving full creative potential. He notes that the struggle between art and business is not unique to the gaming industry, citing examples of famous artists like Van Gogh and Rembrandt who failed to achieve their full potential due to a lack of understanding of business. The lack of understanding of business fundamentals can have severe consequences, as seen in the recent layoffs and closures in the gaming industry. Fischer concludes that the key to success lies in perseverance and learning from failures, quoting a Kazakhstan developer who compared games to pancakes, emphasizing the importance of experimentation and iteration to achieve perfection.