GB: The revenue impact from increasing share in China alone — that sounds like it would be very attractive for small developers.
Riccitiello: I think so too. It’s just a matter of getting on. Most developers — I’ve worked with big developers where you can send an army of business development people to China and try to figure out how to crack the market. We’re trying to turn it into something you can do from your basement.
GB: Do you see signs that you’re pulling ahead with regards to Epic in particular? The other engines definitely seem to be weakening?
Riccitiello: Unreal does a lot of good things. I don’t in any way begrudge them. We’re in a different position than they are. We’re many times larger in terms of our market impact. But Tim’s an incredibly smart guy, and outspoken as you well know. They have a revenue stream we don’t have. They make games. I could argue they compete with their customers. I was always discomfited by that, buying tech from a company when they’re in my competitive wheelhouse. But they make a good product. In a lot of ways they’ve been a perfect ecosystem partner, because if you go back three years ago, they did some things a lot better than we did. We did some things better than them at the time, but they’ve given us a lot to focus on and respond to.
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If you go back years ago I had a bunch of situations where there was an opportunity to take a sports category exclusive. I never liked that idea. In the absence of competition a certain lethargy sets in. I like that there’s market competition. We have Cocos in China. It’s 2D only, but still. Anybody would be crazy to discount Amazon.
Above: Unity headquarters in San Francisco
GB: Is there anything disturbing about Amazon, in that they’re charging nothing for their product right now?
Riccitiello: You [pay] what it’s worth. [laughs]
GB: With Epic I think their argument is they have a greater share of revenues. Are you pecking away at that?
Riccitiello: If you could ever introduce me to someone who’s paying five percent, I’d love to meet them.
GB: What they say is their customers generate more revenue than Unity customers.
Riccitiello: That would be hard to believe. Unity customers are Mario, Pokemon, Marvel, virtually everything you see in AR and VR, 40 percent of console. There’s probably two million games built every year in Unity, and maybe 200 built in Unreal. I don’t know their exact numbers because they don’t publish them. They definitely have a couple of big games. I don’t think they have anything as big as Mario or Pokemon Go or Marvel Contest of Champions. But I’ve never looked at that argument.
GB: Are in-house game engines disappearing?
Riccitiello: I don’t know about disappearing. We’re just trying — in my view, a game company building a game engine — those days are not numbered, because I don’t think it will go away for the top games, but I have more people building Unity than any other game company. Maybe more than the top three combined, including Epic, in terms of what they have up against the game engine. We can just do more in terms of engineering. We’re maniacally focused on that. We’re good at that. I humbly recognize that we fucked up a few things too, but we focus on what makes us different and better.
There’s no reason a home builder could not be in the lumber business and could not own forests or own land and water it to grow trees if they wanted to. But there’s a lot of reasons why the lumber industry and the construction industry are not usually the same companies. We’re not in the game-making industry, but we also don’t make TVs to play games on. You decide where you want to focus.
One way to think about it, when I was early in my days at EA, virtually everyone made their own game engines. Today about half of all games are built on third-party engines, maybe 55 percent. We represent the vast majority of that. But that number has come from zero to half. I don’t think it ever gets to 100 percent. Companies are going to continue to innovate, or try to innovate, on their game engines. But little by little they’re dropping off.
I don’t know what share will end up staying. Maybe 10 or 20 percent? Certainly I don’t think 30. There will be a few games where the companies have a culture that’s engineering-centric and they’ll continue to build their own.
Above: IMAX offers a VR arcade in Los Angeles.
GB: Where do you think we are in the VR cycle?
Riccitiello: We’ve announced the first game of the season. That’s three months from now. So the season hasn’t even started. We’re not even in the pre-season at this point. I don’t know if you were aware, but at the Vision conference a year and a half ago I gave this talk about the gap of disappointment. Everyone was talking about how the VR and AR business was going to take off like a rocket. I spent most of my time at home with an ice cream headache trying to get over the nausea induced by the products I was trying. It just wasn’t ready yet.
We’re now just starting to see what I believe to be where this is going, which is fully mobile, whether it’s a mobile device built in to an HMD or a dedicated hardware device. You can walk. You can interact. The Void experience for Ghostbusters in New York is the best I’ve tried so far. I think there will be an infinite number of great things.
My guess is we probably won’t even see what feels like a killer app in 2017. If you looked at that graph, the way I drew it went — I was about 60 to 75 percent under the industry forecast for 2016 and 2017. I started to catch up in 2018. It was a function of the fact that I’m pretty close to the space. I could see a combination of high pricing — I didn’t agree with the notion that you could stay cabled to a tower PC. That never made a ton of sense to me.
I was looking at it with the same eye as I’d look at a console, when I made decisions back in the day. “Dreamcast doesn’t look ready. It doesn’t have the support to get there.” You look for a bunch of different things. It’s a price point. It’s a compelling technology story. It’s a content platform. I haven’t yet seen anybody bring that combination together in a way that makes me feel like there’s a reason for 100 million people to buy it.
It’s not hard to see the conjuring of those components. But that’s what I mean. The season hasn’t started. We haven’t even picked teams yet. It’s just stirring and getting ready to attack.
