How to free game developers from working in content factories | Owen Mahoney

Shortly after Owen Mahoney announced he was stepping down next year as CEO of Nexon, I interviewed him about why he chose to do that. And we had a chance to hear from him a second time at our GamesBeat at The Game Awards event.

At that event, Mahoney said that triple-A games are ripe for disruption. And it’s a funny thing coming from him because he’s still running a company that has a lot of triple-A games, albeit ones that are run more as games-as-a-service.

Mahoney joined Nexon in 2010 as CFO, and he oversaw its initial public offering in 2011. He has led the company as president and CEO since 2014. Under his leadership, Nexon delivered consistent growth in revenue and operating income and the most robust pipeline in the company’s history.

Nexon announced on November 11 that Mahoney will step down in March 2024 and be replaced by Junghun Lee, head of Nexon Korea and a board member.

Despite the fact Mahoney was a Westerner in charge of a company with its headquarters in Japan and much of its development staff in South Korea, Mahoney had a stellar record while running the company that is known for Dungeon & Fighter, MapleStory, Kart Rider on the PC and recent mobile hits like Dungeon&Fighter Mobile, MapleStory M, Blue Archive and Dave the Diver. During the most recent quarter, MapleStory grew 46% compared to a year ago.

Stepping down

Starting next March, Mahoney will stand for re-election to Nexon’s board and serve as senior advisor. Both Lee and Mahoney will serve in their current roles until the succession is formally approved. It will be interesting to see where this company, valued at $20 billion in the stock market, goes next.

On the day that we spoke on December 7, Nexon announced at The Game Awards that it was launching The Finals, a first-person shooter game where combat becomes a spectator sport. It’s a multiplayer-only game where players compete in teams of three against two other teams to win tournaments.

In our talk, Mahoney said this triple-A game was made with fewer than 100 developers. This is what Mahoney meant by disrupting triple-A games.

In our talk, Mahoney said it surprised him that so many people had asked him why he was stepping down.

“We’ve been public for about 12 years. I’ve been CEO for 10 years, the average lifetime of a CEO of a public company our size is roughly six and a half years or so. So 10 years is a very long time. And, you know, Nexon has always run its business for the long term. And a big part of building long term shareholder value, which I would argue [we have been] very effective at doing, is about making sure you’ve got a strong team and a strong succession plan,” Mahoney said.

He added, “[That is] really corporate governance topic, which is not really the topic of your show today. But just briefly on that, most companies and especially most media companies talk a really good game about corporate governance, but they actually when it comes time to actually dealing or governance, they, they actually do kind of a bad job at it. And yet, most of those companies that secure according to their rules are running off the rails and somehow need fixing.”

And he said, “So what is corporate governance? You’ve got shareholders who are the owners. The owners expect the management team to get their job done. They don’t want to get in and out of stock. The long-term shareholders are long-term oriented, which is what we always want. Not hot money. They want to not worry about the management team.”

The board always needs to ensure that it has a good succession plan in place in case something happens to the CEO.

“For the for the benefit of the shareholders, you got to make sure you’ve got a good plan in place,” Mahoney said.

He said that you have to have a really good bench, and he believes Nexon has one of the best benhes of executives in the business, based on performance.

The second thing is you have to think about timing, he said.

“What’s the best time to do it? It’s not when the company is on its heels and not doing well. It’s when the company is doing great, and Nexon is doing great right now. So we’re very blessed because we’ve got a great team,” Mahoney said. “It’s been a great run for me. And so it’s it’s absolutely the right time.”

Mahoney explained why things have gone well. He said Nexon was always different.

“We were founded in Korea at the dawn of the internet, we are listed in Tokyo and America. 7,500 of our employees are in Korea, we’ve got a major studio in Stockholm, Sweden,” he said. “So people have a hard time understanding what we’ve done. But at the dawn of the internet, we came out with the first MMORPG called Kingdom Wars. Long before World Warcraft, or any of those games, was Kingdom Wars in Korea. We also came up with the first free-to-play game, Quiz Quiz. Most people don’t recognize that. But we’ve always wanted to build a business that lasts for a long time.”

He noted most games go up and then down.

“And that trope is existed as long as I’ve been in the industry, which has been 20 years now. That trope or that sort of bromide,” means that people believe games can’t last forever. But Nexon calls its games “forever franchies,” and it has proven that with MapleStory, which is not huge in the West. It’s huge in Asia as a massive franchise.”

“When we did the IPO, as the CFO, the number one question I got during the roadshow was, ‘When is MapleStory going down?’” he said.

That was back in 2011. He noted that in the last quarter, MapleStory was up 46% from a year ago and it’s bigger than ever as it celebrates its 20th anniversary. Dungeon Fighter has a similar story, as it’s much bigger than at the time of the IPO.

“These games can continue to grow forever,” he said.

And that has enabled Nexon to create new businesses because the business model does not require Nexon to replace old games with new games, which is more like the sequel or franchise model.

Rather, Nexon can feed its revenues into investing in games that are highly innovative, he said.

That’s what enabled The Finals from Nexon’s Embark Studios.

“We’re very, very proud of this,” he said.

In the beta, there were 7.5 million downloads across the consoles and PC for the free-to-play game. It shows that gamers and the industry want new ideas. This kind of model of launching new intellectual properties gives Nexon a better chance of having a breakout hit.

Creating fun experiences

Mahoney noted that many FPS games are so full of skilled players that it gets frustrating for the normal players, who are slaughtered and don’t have a fun experience. Nexon created The Finals to be fun even if you’re losing. I noted how I was guarding a door and someone blew a hole in a wall and too me out. And then I laughed at that.

Unhappy people across the ecosystem

I noted that Nexon has created a financial cushion that takes the pressure off developers, and that allows Mahoney to communicate a message to the developers that they should make the game that they always dreamed of making, rather than the game they think the CEO wants them to make.

“I have observed that very few people that I talked to in the video games industry are very happy right now. Nexon is having a fabulous year, but the industry at large, as I think the previous panelists mentioned, is not having a great year,” he said.

“So go down the list. Start with customers because they’re most important. Are they happy? Clearly not. They’re very frustrated. We’re in murderer’s row, which is a lead up to Thanksgiving and Christmas. It’s been the heaviest murderer’s row that I can recall in two decades. And we’ve had more disappointments, I think, than I’ve ever seen by a by a longshot,” he said.

He added, “People are very critical and very upset. The highest rated games, but they are not selling as well. We have very low rated games [among the] big franchises. So that’s bad. So we’ve got a problem. If all your customers are unhappy, and go down the list to developers” and they aren’t happy.

“If you’re a developer, you’re highly talented. You get in the industry because you love games. You can work in a lot of other industries, and probably for more money than video games. But you can do games because you love games. What do you get asked to do? If you want to work on a triple A game, you get asked to work in a factory,” Mahoney said.

He said such developer jobs are “glorified versions of painting virtual leaves onto virtual trees in Photoshop.

“That job sucks and nobody likes it. And everybody talks about it, and it pops its head up every once in a while. That’s not a fun situation for a developer,” said Mahoney. “Okay, well, is it the developers fault? Oh, no. It’s their managers fault. Development directors are not having fun either. They’ve got to run these teams of 500 to 1,000. In a couple of cases, 2,000 people. That’s not a development job. That’s not meaning. It’s not a creative job. It’s an HR job. You’re spending your day trying to get people not to quit.”

He added, “You’re trying to scoop up 100 people, they’re making sure that 50 people over there don’t quit. And so, by the way, since it’s an HR job, your HR people are very close to you, because they’ve got to help you with this massive process. And now you’ve got HR professional people in the center of the development process. I can think of a lot of people that could be the center of development, like my tax accountant, would be a better person to have at the center of the development process than an HR person. And that’s nothing against HR people.”

That’s terrible, he said.

“What they’re not doing is creating games,” he said. “Game creation is about iteration, and usually with small groups. So maybe it’s the CEOs who are evil. I can tell you as a CEO of a $20 billion game company. If I make $100 million bet, which is table stakes in a video games industry, to greenlight for triple A game, I get one Mulligan. By the second one, there’s a long line of people out the door who want to shoot me. I mean, that’s how it is. And so what does CEOs do? I can tell you because I talk to them all. They’re scared. They don’t want to make the wrong decision and get shot for torching $100 million or $200 million.”

Why investors aren’t happy

Then there are investors.

“Well, the evil people are the obviously investors. Well, guess what? They’re running from the games industry in large part. I mean, Nexon has done well, again. But the long term investors, who I talk to, with the big pools of cash around the world, they’re very worried about the games industry right now. They had been sold a bill of goods over and over again. Metaverse, VR, esports. And I could go down the list,” he said.

I interjected with blockchain.

“Each one of those was going to be the deus ex machina,” he said. “So why is this the case? Why does it have to be the case? As an industry, we get more and more technology to access all the time. But we’ve found a way to invert the benefits of Moore’s law. Moore’s law is supposed to give us more better products for cheaper. Right, that’s what it is. Every 18 months, it doubles. And what have we done? We’ve made game development go from $10 million greenlight to $100 million, $200 million, $300 million, maybe a billion dollars. And that’s the track it’s on. Raph Koster has talked about this a lot. We’ve talked about it. So we really need to do something different in the games industry.”

We need to navigate through this mess in a more intelligent way because the path is not sustainable, he said. I noted again he didn’t want developers to pitch him something he wanted to hear. He wants them to pitch something they have always dreamed of.

“The best game development ideas don’t come from me. I think they’re going to come from someone who’s really cares a lot about their customer experience,” he said.

Developers can see what gamers want and they also understand the core of the development process. They know the core of the process for new intellectual property, for non-sequels, will be very iterative.

“You’re gonna have a plan. You’re going to hack it up. You’re going to test it for gameplay and bugs and other things. And then you’re going to adjust your plan,” he said. “You’re going to hack it up again, you’re going to keep doing that until you find the fun. And if you don’t find the fun, it doesn’t matter how much money you put into it.”

Such a process benefits from having smaller teams, of five to 10 people. Minecraft was made by one person, he noted. The greatest games came fro small teams.

So I noted that developers should not do things like pitch a blockchain game because they know that’s the quickest way to get funding.

“What I can tell you is I think we would always pass” on such ideas that are supposedly hot topics, he said. “We’ve always wanted to dive into something very simple, like super old fashioned, like, ‘IIs this fun? Right? f we can’t see the fun, then we’re probably not going to invest.”

AI’s impact on games

I also asked him what he thinks of AI’s impact on games.

“I think AI is a software tool, and a software tool that enables developers to be closer to what they’re trying to do, which is be developers,” he said. “It sounds circular. But a tool that makes you go faster to make a more fun game is a good thing in life.”

“Software tools that enable us to do that faster is going to result in more better games, which is frankly what we’re all here for,” he said.

He noted that The Finals team was 75 people, and it’s a triple-A game.

“That is a revolution in our industry. It’s not 500. It’s not 1,000. It’s not 2,000. The way we’ve been able to do that is by spending a little extra time making software tools that make us work better,” he said.

I asked if he could make the game in half the time with 150 people.

“No, no,” he said. “Because it’s an iterative process. There’s a lot that’s new in the game. So you have to iterate on.”

Mahoney said that the industry is ripe for disruption like the taxi industry two years before Uber hit the scene. Mahoney hated the taxi experience in almost every major city. He said that Uber’s creators figured out what was wrong with the system and they focused on fixing that.

Looking around the game industry across the regions, Mahoney said everyone is unhappy. He believes they all need to leverage software in a way they haven’t before, spending time and money making tools that are made to find the fun, and then using those tools in a more intelligent way.

“We would have many more fun games, and probably a much more successful industry,” he said. “We’d have a lower cost structure. But that’s not the most important thing. We probably would have a much higher revenue because we’d have many fans playing a lot more games. And we’ve seen this happen over and over again, in our industry, when somebody comes up with something really different. You get a lot of new fans and a lot of people very excited.”

So that means the game industry is ripe for disruption.

I asked Mahoney what he was going to do next.

He said, “I’ve always been sort of a hobbyist coder since I was a kid. And I deal with a lot of people who are very deep in code. And I would like to spend some time going very deep on the tools and celebrate those just as sort of continuing education. Using time to focus on that, but that’s my journey. I’d like to do that before I retire.”

I suggested user-generated content.

“Maybe I’ll be an influencer,” he joked.