State of The Gaming Industry And Why VCs/Entrepreneurs Should Care

People often ask me:

"VC Whisperer, what is the state of the gaming industry and what are your thoughts?"

I was fortunate enough to spend the first few days of the month at the 2011 Montreal International Game Summit (http://sijm.ca/2011/). It was a tremendously enlightening conference, with thousands in attendance. And it was a clear sign of the vibrant state of the gaming industry, not only in Montreal, but around the world.

Here were some of the big takeaways for me:

Mainstream success is both the best and worst thing about the gaming industry. The gaming industry is a $66 billion business this year, growing to $81 billion in 2016. That's billion with a b. Gaming is no longer exclusive to fringe/nerd culture. It has officially achieved widespread and mainstream success. Everyone is a gamer these days. However, because of gaming's mainstream success, the focus today is very much on making money. That doesn't necessarily drive the best creative process. Also, it used to be that if you were making a game for you, it would be successful. The mainstream success of the gaming industry has made this untrue today. Many different demographics of people are playing games and the reality is that many game designers are making games they don't even play themselves and for people they don't understand.

The gaming industry has become a sequel driven business. Much like the film industry, game producers are having to pour more dollars into increasingly larger productions ($50-$75M budget for a hit game). Therefore, they're taking fewer gambles. They would rather bet on an established franchise. The result is many fewer "new" games and many more sequels.

Video games killed reading. Fewer and fewer kids are reading books these days. However books are often the source of creative material for many games. Because of this, "a game may be the only book they ever play".

Gaming is now a "4 screen" business. People are no longer just playing PC games. The industry has moved to many screens: phone, tablet, PC, TV (console). This is creating lots of opportunity for new game studios to emerge and capture market share. It's also creating many new classes of games.

So what does this all mean for VCs and entrepreneurs. Well, the blockbuster console games will likely stay the exclusive realm of large established game studios. They are the only ones who can afford the hefty budgets. However, there is a huge opportunity to address the new player demographics and new platforms with all new types of games. VCs will continue to pour money into gaming companies, and entrepreneurs should take advantage of this trend.

2011 Montreal International Game Summit - The VC Whisperer Will Be There

People often ask me:

"VC Whisperer, what do you think of the gaming space?"

Gaming is a very hot space right now in the startup world. And the space is increasingly coming under VC scrutiny because of the move away from console and PC gaming, to trends like social gaming, casual gaming, and mobile gaming (on tablets and smartphones).

For this reason, the VC Whisperer will be at the 2011 Montreal International Game Summit today and tomorrow, covering the most interesting sessions and stories (with a focus on the business end of gaming).

Stay tuned for coverage and for upcoming posts on the subject of gaming.

Amazon Is The New Apple - The Experience and Ecosystem Matter

People often ask me:

"VC Whisperer, what do you think of the new Amazon tablets and e-readers (and the tablet market in general)?"

Amazon's announcement is now a few weeks old. The tablets are interesting but not ground-breaking. The Kindle Touch is a nice evolution of the Kindle readers that we've all come to know and love. The Kindle Fire looks like a very solid Android-based tablet, with good specs and an even better price-point.

At face value, the Amazon Fire doesn't seem that much different from the sea of Android tablets on the market today. However, if you dig deeper, I think Amazon is starting to get it. And many others (Samsung, Motorola, etc) just don't.

It's All About The Ecosystem
So far, only Apple has understood the key to tablet success. It's about the ecosystem. Apple understands the power of tying their hardware to music, movies, apps, and many of their other products (eg. via Airplay). Amazon also understands the ecosystem. And they have a huge library of content to support it. With the Kindle Fire, they have a decide that can tie the ecosystem together and give consumers a very slick entry-point to the Amazon world. For this reason, Amazon will likely be the only real tablet competition for Apple in the near future.

Android is Killing Tablets
While the lack of a substantial ecosystem is hindering most of the other tablet manufacturers, Android is also  a problem. How can you differentiate from one tablet to the next when Android is washing them all down with the exact same features and functionality? No wonder Apple is kicking ass, as they've got the only differentiated experience in the market. For this reason, Amazon is downplaying the fact that the Fire is Android-based. In fact, it's mentioned nowhere on the product page. And the user interface is definitely quite a bit different from a stock Android implementation. For this reason, Amazon will be able to compete as a differentiated experience with Apple, where most of the other manufacturers will see their margins dwindle (assuming they sell any substantial quantities in the first place) as the experience is completely homogeneous.

Connectivity is The Killer App
Finally, I believe Amazon is on to something big with Whispersync. Apple understood that connectivity and cloud-based storage (later) was an integral part of their tablet experience. With Whispersync, the Fire gives every user connectivity and access to their media, as well as the Amazon ecosystem. This is an important differentiator from the other non-Apple tablets on the market today.


I have been an iPad user since day one. Because of the strength of the Apple ecosystem, that will likely not change for the foreseeable future. However, I will likely pick up a Kindle Fire. Amazon is starting to understand what Apple has been doing right all this time. They have the ecosystem, and they're not just trying to duplicate the iPad and Android tablets out there. They understand that producing a nice piece of hardware just isn't enough anymore. It has to be part of an experience. It will be interesting to see how this space plays out over the next 12-18 months, but those who understand the end-to-end experience are the ones who will be successful.

Startups Fueling Corporate Growth - IBM Banks On Small Start-Ups For Big Growth

People often ask me:

"VC Whisperer, what can big companies do to grow sales? Where can they find growth?"

I saw this article on the Wall Street Journal a few weeks ago. It discusses how IBM was looking to startups to fuel sales growth:

IBM Banks On Small Start-Ups For Big Growth

The reality is that this is IBM paying lip service to the startup community, and getting some good press. There is very little entrepreneurial that goes on at a company like IBM (or any other big company - not meaning to single out IBM). However, I think the idea is a good one. Big companies (like IBM) need to not only look at startups as potential growth engines, but rely on startups to fuel future growth. Many of these big companies have stagnated, and only with fresh ideas will they be able to find new revenue.

It's a major shift in thinking and a major shift in behavior that's required. Big companies need to partner with more startups. Big companies need to acquire more startups. Big companies need to allow more of their employees and business units to be entrepreneurial and operate outside of standard processes. Only by doing all of these things will they avoid the inevitability of stagnating revenues that plagues so many corporate giants.