This talk was originally titled “How to prevent the inevitable enslavement of game developers by Facebook”

Thank you for showing up. I know many of you are likely recovering from the parties, so just making it to this session is a heroic act.

Let’s get your energy moving a bit. •If you love making games, I want you to yell “Games”! [Big cheer] •If you make money on Facebook, I want to you yell “Money” [Confused cheer] •If you love Facebook as a platform, I want to you yell “Facebook” [Dead silence]

That last yell was a bit anemic. Hmm…well, that okay. When comes right down to it, Facebook doesn’t care if you don’t love them. All they want is for you to “Like” them. [Punchline: Like Icon revealed]. As a platform, all they ask is that you continue to use their system so they can derive value from your labor.

1

Here’s who I am. Three things to keep in mind:•I’ve been in the industry for 16-years and have seen many platforms come and go. The rise and fall and rise of the PC. Multiple console generations. •I spent 10 years building platforms both at small companies and at huge companies like Microsoft. So I have some idea what the sausage factory looks like on the inside. •I have my MBA, but I am fundamentally a game designer. So I love looking at the systems behind the historical patterns and how to bend rules in interesting ways.

I founded Spry Fox. We practice what I’ll preach here. We create original IPs and then build a team around that. The team gets a rev share and is paid if the project is a success. This is project-based development much like the movie industry uses. It enable innovation and empowers the developers. We have 6 titles in development with teams all over the world. We don’t serve the publishers. We don’t serve the platforms. We make games for our customers. We put our games on new growing platforms that haven’t yet decided to sink their claws fully into the developer’s wallet. Honestly, the whole thing is working out far better than I expected.

One thing I’ve learned is that this is a great time to reinvent the game industry. I’ve seen the old models for making games and in general they are a hellhole of developer misery. We can learn from the past and build a brighter future.

More info on Spry Fox: http://www.lostgarden.com/2010/09/announcing-spry-fox-my-happy-new.html

2

Platforms play games of power. They accumulate power. They use power. And most developers are completely clueless about how to play and win.

Here’s what we’ll be covering this morning.

•First, an example of platform power•Second, how the exercise of power can be treated as a game. •Third, how platforms exercise power •And last, but not least: How you as a game developer win a game that has historically been stacked against you.

3

Let’s talk about power.

4

Power is the ability for one party to get another party to do what they desire. Power is a capability. Having power says nothing about morality. Superman is powerful, but good. Lex Luther is also powerful, but leans a bit toward mildly evil.

Tons of different tools of power. Official power, coercive power, persuasive power, etc. It is a deep topic and is the grand scheme of human drives and probably second only to money and sex. Power is a big deal. Both Platforms and Developers try to exercise power. It is how we get things done. But very few people actually talk about it! Let’s start the conversation.

5

To illustrate Platform Power, let’s look at an example.

In a galaxy, far far away there was a shining empire known as Facebook. Out of the goodness of their hearts they were making the universe better for humanity. Sam Lessin, a Facebook Project manager summarizes: "You get at most one — if you're incredibly lucky, two — shots, maybe, in your lifetime to actually truly affect the course of a major piece of evolution. Which is what I see this as.” http://www.time.com/time/specials/packages/article/0,28804,2036683_2037183_2037185,00.html #ixzz1GoVXNzMN

Then this guy [cue LOLapps image] shows up. The details are shrouded in PR speak, but it appears that someone other than Facebook was leaking massive amount of private data to nefarious companies. What is crystal clear is that LOLapps broke Imperial law.

Seriously though? What is the worst that could happen? This is the internet, right? This is the place where we are a better, kinder, ‘more evolved’ version of humanity.

6

Here’s what happened. LOLapps ceased to exist as a consumer facing entity. Goodbye Alderan.

This is an example of coercive power. You do force someone to do something that they would generally be unwilling to do.

I make no moral judgments about who was right or wrong in this situation. I only see the results. Right or wrong, this is a brilliant example of what a platform can do when you piss them off. This is why no one talks about platform power. If you make some minion deep in the bowels of a platform angry and they have the power of a kill switch, then the developer will suffer.

(It should be noted that Platforms don’t like to use coercive power. It generally has an unpleasant PR backlash. Do it for 20 or 30 years and enough people might get irritated enough to do something about it. Witness Egypt.)

7

Here’s how coercive power works in this case. These are Power diagrams. I’ll go through them in more detail later.

Facebook severed the link between it and LOLapps. Since it was the sole gatekeeper between LOLapps and the customers, there was literally nothing that they could do. They couldn’t reach their customers, so they were essentially completely at a whim of Facebook.

A couple fascinating outcomes here that you can see if this diagram:• Facebook gains power. The successful exercise of power increases the perception that you have power. • LOLapps loses power. They needed to scramble to find an alternative source of customers or do whatever Facebook requires to reestablish contact with customers. • Customers lose power. Millions of users who gained value from LOLapps products were shut off. Facebook moderated this by controlling the message and saying it was about protecting the customers and by demonizing LOLapps.

8

Platforms exercise power. This is not an isolated case. I mention Facebook not because they are particularly egregious in their hunger for power. Really, they are just yet another platform doing what platforms do. It doesn’t matter the size of the platform. The number of Flash portals that act like petty warlords is astounding.

As a long as a company owns a walled garden platform, they tends to abuse developers. These are the more public examples, but there are dozens more. Every single developer who has been in this business for more than five years can likely tell multiple examples of how they have been screwed by a platform or a publisher middleman. It is kind of like our dark little secret. I suppose that makes GDC bars our support group.

9

Why does this even matter?

10

Over time…•Profit margins decrease•Creative control decreases•Forced into entangling relationship•Large increase in financial instability.

I call what is practiced in the console space “Plantation Development”. Developers don’t fair well in this model. Early in the evolution of a platform, developers are excited to work for their platform partners. But platforms last for decades and slowly but surely, they erode the freedoms of the game developers.

As the platform evolves, developers end up in one of two end game positions. They sell out and end up being a cog in a bigger machine. Or they die as an independent entity. We are all familiar with the plague of bankruptcy and mass firings that are such a popular business strategy for 3rd party studios in the more mature platforms.

You may think that social games are different. But they aren’t. Think about this: Facebook is going to be around for another 20 to 30 years. If you don’t feel like cheering for Credits and other policy changes now, imagine how the platform will be treating developers once the hooks are deeper and they are even more fully entrenched in your business model.

Have you seen social networks in Asia? QQ Zone has a managed game portal, internal studios and a 75% taxes on all transactions. Someone with a thirst for power only seeks more power over the weaker parties. This is likely the best you will ever have it as a social game developer.

The game of platform power is an old game and we’ve seen how it turns out. It follows a familiar pattern and leads developers to a familiar end.

The good news is that if you understand the rules of the game, you can hack the system. If you are clever enough and agile enough, you can maybe, just maybe even beat the system.

11

Now you’ve seen a little of what is at stake, let’s define the game of power in a bit more detail.

Central Premise: Business is not solely an economic activity. It is a political act driven by money, relationships, and ego. The moves of the game are always based on the accumulation and use of power. Though many moves are cloaked in a false mask of civility and logic, we are all playing an ancient game of ape dominance.

The win condition is very simple: Gain more power.

12

Here’s are the players:

•Initially, there are really only two players that matter: The players and the game developers who serve them. •However, by chance or intent, there are platforms with existing relationships with players. These connect the game developer with more players. •Tool provide appear to help game developers make games more efficiently. •Middle men in the form of aggregators, publishers and protection rackets insinuate themselves into the mix as well.

13

Here are the rules: A more powerful group (Big circle) has a relationship with a less powerful group (small circle). If we go back to our original definition of power, that means they can make the subservient group do what they desire.

It’s a pretty simple diagram.

14

However, all these relationships form a network. Think of this as your gameboard. Here’s what social games on Facebook currently looks like. In a single glance, you have a pretty good idea of who has power and what relationships matter. You can draw one of these power diagrams for any market and then make predictions on how it will evolve.

Some interesting points: You can see that Facebook is relatively monolithic. They tend to be able to make decisions quickly and in unison. The only group with comparable power are their customers. But groups like the customers or small games are heavily fragmented. In aggregate they have substantial power, but individually they have very little.

15

Let’s jump right in and start showing how a platform plays the game.

A platform takes an action…you can think of these as playing a card. These fall into several categories• Coercive: The player blocks someone from taking an action or forces them to behave in a manner they’d rather avoid. • Distribution Power: The player takes control over access to new customers. • Retention Power: The player takes control over the long term relationship with the customers. • Monetization Power: The player takes control over extracting money from the network.

You don’t see the following in this particular game of power. •Physical Power: No one can hurt another player. Being on a platforms is a voluntary relationship. This becomes hugely important when we look at developer moves later on.

16

Platforms go through phases. They change and evolve. The first phase is the growth phase. Platforms aren’t even platforms at this stage. They are just another company, growing like crazy. Everyone loves them and people whisper “Hey, this might be the new big thing”

17

Here’s our first Power Card. Almost all platforms start out by being useful. They build an application that helps users.

18

Young platforms generates value for customers. They build a relationship with customers by providing an awesome application or service.

This moment shapes the philosophy of the platform. Deep down, they always believe they are creating value from nothing and are critical to helping customers. No matter what happens in the future. No matter how predatory the platform becomes, they all hold onto their platform creation myth, that early moment where they saw an opportunity and created a vast amount of value. This moment is the seed of platform righteousness.

Apple made an amazing phone first and foremost. Windows put a personal computeron every desktop. Facebook is a killer photo gallery and one of the better address books out there. They changed the world. And in the future, nothing you do as a developer will ever make a platform company stop repeating over and over again that they are the primary source of value in the ecosystem. Your parasitic insignificance and the platform’s obvious awesomeness justifies everything that follows.

19

With the creation of a killer application comes the platform’s first super power: Distribution. They now have access to a vast number of customers.

20

Now we’ve entered the Engage Phase. Platforms have a big resource in the form of all their customers, but they need help scaling. So they engage with the developers.

Keywords here are Welcoming, Friendly, Enabling. During this phase, the platform is on the side of the Developer. They want 3rd party developers involved because they are still building and exploring what is possible with their platform. And let’s face it. It is far cheaper to get a thousand faceless developers to jump into the entrepreneurial gristmill than to try and do it yourself.

21

Allow 3rd party developers access with the goal of accelerating growth

Huge Win All around.•You create more value! •You increase retention•You bring even more users in to your system. •And it lets you scale without spending lots of money. Developers flock to your platform and life is good!

22

Now we start seeing power relationships emerge. The developers are reaching new customers, but they need to go through the platform.

My Space failed to do this and actively fought against widgets. In the end, they weren’t able to generate the same value. Facebook actively encouraged 3rd party developers and so were able to scale and grow faster and bigger. http://techcrunch.com/2007/05/24/facebook-launches-facebook-platform-they-are-the-anti-myspace/

23

Now the platform serves as an intermediary between the developers and the customers. Here’s another way of looking at APIs: Code is law. (Lessig) A platform with an API can instantly legislate new behavior for both users and developers. Change a single line of code and you enact a law that alters the lives and livelihood of millions.

We start seeing the transformation of the platform from a company that creates value to a company that manages value created by others.

24

The first step in governing developers is getting them to immigrate to your platform and make stuff. So you create a honeypot. You find or create a developer success on your platform. And then you promote them like crazy, tell all other developers that they could be rich and famous just like your success story. Movie studios do this with child stars. Everyone knows the joys of being a child star. It is a pretty miserable life for 99.99% of all kids. Yet all it takes is promoting one Shirley Temple and the masses flock.

25

Examples: •Doodle Jump and Angry Birds on the iPhone, •Mafia Wars and Farmville on Facebook. •Braid alone has inspired an entire generation of indies to throwaway their lives targeting XBLA. Yes, Jonathan Blow is our industry’s Shirley Temple.

26

What happens when you’ve sent a bunch of developers into the Wild West and they actually find a new product category. Roughly 20% of the apps are going to drive 80% of the traffic. If the platform can own key apps in a market, they control retention of 80% of their customers. This reduces their dependency on 3rd party apps and grows their empire. So a classic strategy is to harvest any apps that show promise. Think of this as nationalizing key industries.

Microsoft did this with Office to maintain control of Windows and with Halo to maintain control of Xbox. Nintendo does this with all their properties.

27

In this example, we see a break out hit in the form of a mobile Twitter client like Tweetie. The 3rd party developers have successfully tapped a new use case and started generating an immense amount of value. Instead of letting these happy entrepreneurs thrive on their own, Twitter bought them, released Tweetie for free. And then they immediately mandated that other clients stop innovating so that there was no customer confusion (aka competition).

Due to Twitter’s actions, several 3rd party companies will die or be forced to give up on their previous business models. In theory, this results in a platform losingdevelopers. It is, afterall, a blatant destruction of trust.

In practice, there are just so many developers that pissing off a handful doesn’t really hurt a platform. Remember, the developers are fragmented. Even if they are angry, they can’t muster enough of a cohesive response to impact the platform in the least. Ah, the joys of being a powerful platform. Wins like this decrease a platform’s respect for their developers.

http://thenextweb.com/socialmedia/2010/04/12/burned-scared-twitter-appdevelopers-burned-scared-replace-twitter/

28

Uh oh. We just drew a black weakness card. There’s a risk here. What do you do if there’s someone who is growing big on your platform and you don’t own them? This is an “oh crap” moment for a platform.

29

Let’s take Zynga. 53% of Facebook users play games. 20% of everyone on Facebookis playing Cityville right now. Zynga is doing everything it can to build direct connections with customers. Customers are being pulled in two directions. There are those who game and those who joined to use Facebook.

Imagine you are looking at long term strategy. What happens to Facebook if Zyngagoes elsewhere? What if Zynga turns off Facebook? What happens if Zynga actively directs customers to a competing social network? If Zynga has a stronger relationship with the customers than Facebook has, then Facebook as a company is threatened.

It is at this stage that platforms begin consolidating power. They realize that free developer friendly, win-win growth results in the platform losing control. Because some developers might turn into real successes and start dictating future growth.

Microsoft ran into this problem with WordPerfect many years ago. People bought a PC to use WordPerfect. Microsoft built Word and ended up completely destroying Word Perfect in the marketplace. In a game of power, a threatened platform will happily destroy a developer even if it is adding a large amount of value to the ecosystem.

http://www.quora.com/Games/What-percent-of-Facebook-users-play-games-and-what-percent-of-time-spent-on-Facebook-is-gaming

30

The first thing to do when faced with a challenger is to kill their growth. For Facebook, this meant killing the viral channels. If you can turn on distribution, you can turn it off. And then reintroduce it when it suits you. Think of this as a form of declaring martial law.

31

Now we’ve entered into the Extract Phase. Most platform companies are highly profit motivated. Why not use your newly found and highly effective power to line your pockets?

I will note, that you really don’t need to go here as a platform. •Linux doesn’t.•Wordpress doesn’t•Craigs list doesn’t•There’s a good chance a platform like Android won’t go heavily in this direction.

Platforms can thrive by staying in the Engage phase. Enabling developers and building a strong ecosystem is enough. If you can deliver value to customers and developers, you can build a platform that lasts for many decades.

But most platforms dive directly into the Extract phase as soon as they have the power to do so. It is their nature.

32

The most direct route to extracting money is to require payment for using the service. I think of this as taxation.

Remember how platforms start off as services that help customers? At this stage of their evolution, they’ve transformed into what is effectively a full fledged form of government. They have citizens, immigrants, legislations, penalties and now taxes.

When you choose a platform, you are choosing to do business in a virtual country. The platform starts devoting the majority of its efforts to the act of governance and proportionally less to the creation of value.

33

Facebook provides a lovely example of how a platform can implement taxation without representation. Early on, a highly competitive and innovative payment ecosystem sprung up that directly serviced game developers. It was messy and fragmented, but due to the joys of open competition, the payment provider were doing the following: • Rapidly innovating new payment models• Improving their service and reliability• Reducing their margins and driving efficiencies throughout the system.

In one brilliant maneuver, Facebook severed the link between payment providers and developers. Credits mean that the payment providers are serving a single monolithic purchaser of their goods. This means that relationship with Facebook and the singular needs of Facebook are more important than the needs of the developers or the needs of the customers. Open competition and innovation has seen a major and massive setback.

The power of developers has been reduced as well. Instead of being able to find the best payment system that works for their particular application and users, they now have a cookie cutter, one size fits all payment method. A uniform set of rules (with the occasional arbitrary exception) governs all payments. The open bazaar has been replaced with a Soviet-style dispensary.

It is worth noting that Facebook was ‘nice’ and implemented a relatively low tax rate for the initial release. In Asia, taxes go as high as 75%. Give it time.

34

Now you’d think that the best way for a platform to implement something is the Power Grab. This card involves legislating a law that is heavily in the platform’s favor.

Platforms are generally autocratic system. They rule by fiat, there is rarely any representation by those who use their services. If you were to classify the type of government, smalls one can be seen as warlords, large ones more of a dictatorship. A dictatorship doesn’t ask constituents what they want. It does tells them what they need to do. And when you can enact laws by simply changing a line of code, why not? Customers don’t do code reviews.

35

Here’s an example of why power grabs are dangerous for Platforms. In March 2008, Microsoft arbitrarily increased their cut of XBLA royalties for developers not signed with a publisher from 30% to 70%. This ultimately failed. They misjudged the market. It turns out that there was bad PR and a lot more competition from other platforms than expected.

Look what happens to the power diagrams here. XBLA exercised power, but they failed. Their perceived power (the dotted line) ended up being false and instead they revealed their actual power, which was far less. I would go as far as saying that the primary people who get bad deals on XBLA these days are poor, uneducated indie developers who do not realize that XBLA doesn’t actually have as much negotiating power as they are willing to claim in the first opening rounds of negotiation. Information is (quite literally) power.

36

Black card! Turns out that most platforms are really press sensitive. If there is a clear and obvious breech of fairness, the press will happily report on how platforms are evil. There are promotions on the line, people! If you provoke the press, you don’t vest!

37

A strategy that lets you avoid a public loss of power helps. Luckily the press only reacts if issues are in black and white. If you implement legislation in a piecemeal fashion, no one will notice the injustice. Slowly, but surely raise the temperature on your victim. By the time they are boiling, it is too late to object.

Never appear blatantly evil and the masses and the journalists have no martyr to latch onto.

38

Here’s the Facebook Credits timeline. Over a period of four years, they slowly but surely implemented a robust method of taxation. They proved technical feasibility, then negotiated backroom deals with those who might complain and finally mandated the system for all the smaller groups that had no power. It was really quite cleverly done and I applaud their talent for execution.

39

In the last example, one of the technique we just witnessed was how a platform forms a beneficial relationship with a few companies.

This is one of the classic ways that developers try to get ahead. They sell their soul for a chance at special treatment from a platform.

40

From the platform’s perspective, this is a version of divide and conquer. First you sign long term contracts with certain influential developers, so they no longer are playing by the general rules. This reduces the power of the mob and binds key parties even more tightly.

There are two types of developer you want to target. •Your enemies: You want to keep someone like Zynga close and get them as entrenched in your ecosystem as possible. If they try to leave or cause troubles, you’ll know it immediately. •Your puppets. Once you have the ability to be the king maker on a platform, you want to prop up a handful of yes men who will do your bidding when you want to try something. They act as your kept early adopters and general lap dogs. You can promote them as a Shirley Temple if you want PR for a new initiative. It can be a good life for the developer as long as they are useful to the platform. The platform can always turn them off if they get too uppity.

41

Unfortunately, being the special friend of a platform is notoriously unstable. We like to think having a relationship with a platform like having a relationship with a person.

But platforms are large companies. Platforms are not human. They are a collection of individuals in a crazy Stanford Prison experiment.

42

Here’s an example. David Edery was the World Wide Portfolio Manager for Xbox Live Arcade. He made a lot of deals and forged an immense number of relationships with external developers. Those developers felt they had a direct relationship with Microsoft.

Yet consider this: David was at Microsoft for about 3 years. In that time he was reorganized 7 times. Corporate strategy flip flopped at least 3 times. If you make a deal with someone and they are reorganized, the personal relationship with that company is effectively dead.

What remains in the chaos of the reorg are isolated individuals trying to make the best of things. They find themselves in positions of power. “Hey look at this great contract someone negotiated” and they exercise that power without the context of personal relationships. Much like the Stanford Prison Experiment, where normal college students found themselves abusing others, the reward and control structures surrounding the individuals create a lack of empathy with those they exercise power over. Developers become resources and pawns in an abstract game. Metrics, promotions and money are more important than people and delivering value.

You’ve heard of victimless crimes. Large companies result in crimes with no criminal.Employees of large companies are simply behaving rationally with no big picture context. •One person says “All I did was aim the gun.” •Another says “All I did was pull the trigger.”•A third complains “All I did was loot the corpse. What do you want me to do? Leave a perfectly good corpse just sitting there?”

43

The other technique that helps push through anti-developer legislation is to loudly state your message at every opportunity. Platforms do so with the knowledge that others are not organized enough to mount a counter campaign.

44

Since Facebook Credits were launched in closed beta, there has been very little data about how they performed. What we’ve gotten is a repetition of the same message from both Facebook and Facebook mouthpieces: Credits provide “an easy, convenient and trusted way to buy virtual goods.”

Here’s one survey that was done by Inside Social Games in October 2010. Facebook Credits comes in at a distance 4th place with <10% likely to use it as their first choice. Users have other payment options that they prefer using. When real data emerges, the loudly promoted platform message starts ringing false. But they managed to control the message for 3 years so by the time real stories come out, it is too late to protest.

This is all quite fair because from the platform perspective, it doesn’t actually matter if Credits make developers more money. Credits are strategically necessary as a means of taxing the ecosystem. Everything else, including messaging, is just an implementation tactic.

http://www.insidefacebook.com/2010/10/05/social-gamers-are-most-familiar-comfortable-with-big-brand-payment-services/

45

Here’s another common tactic. Hide legal terms that can screw the developer.

Many developers don’t pay proper attention to legal agreements. Platformcompanies have entire legal teams that are optimizing their terms to gain maximum leverage over the developer. The game is played very simply: Put in a half dozen poison bombs in each standard contract and hope that developers only find one or two. Or just state “This is our standard contract and we will not change it.”

46

As an example consider the terms in Amazon’s Android Store. Hidden way in the ‘standard agreement’: They can distribute your game for free by calling it a promotion. And if they run a promotion, their share of the revenue jumps from 30% to 80%. This was a new one. Not even the most unpleasant publisher contracts have terms like this. Essentially, the app store assumed arbitrary control over giving away your app. Also they’ve cleverly removed the developer upside from any sort of promotions.

The developer’s perceived power is high…on first blush it seems like they’ve signed up for just another app store with just another standard rev share. In reality, they’ve merrily signed over their game so that someone else can benefit from it.

47

Another technique of coercive power. You find someone who is going something blatantly wrong. And then you use that obvious injustice to enact rules that strongly benefit the group in power. In broader society, this has been used to justify all sort of horrible things from the interment of American citizens of Japanese descent to the creation of the Patriot Act.

48

In 2010, Facebook shut down viral channels. Games were getting bad press for spam, psychological manipulation, sketchy offers. Social gaming companies arguably brought this on themselves. And that is the genius of good demonization play…there are actual bad actors doing bad things. The anger is completely justified.

In return, Facebooks implements rules that create a massive incentive for games to buy more Facebook Ads. For many companies, ads have become a dominant method of acquiring customers. The singular promise of social discovery, one of the few interesting and original features that Facebook brought to the table, has been gutted.

Lesson: A good demon lets a dictator do almost anything.

49

There are lots of other techniques of power used by platforms.

Locking down user data to cut off the developers relationship with customers. Gate keeping to ensure that only games favorable to the platform have a chance. Trojan Horses in the form of useful technologies that can be leveraged or curtailed at a later point as a means of gaining additional power.

My favorite is the Reformed Criminal. Find someone breaking one of the labyrinthine platform laws, punish that company and then out of the immense kindness of your heart, give them a second chance (as long as they are a perfect citizen and play exactly by your rules.) A public confession is icing on the cake. You see this technique show up in 1984 and Clockwork Orange. It works just as well for platforms.

50

All the cards of power that are played in the Extract phase poison a platform. The poison is incremental and barely even noticeable to the platform owners, especially ones caught in a propped up, inward looking world of high profits and growing revenue. Eventually, however the rules and taxes becomes so onerous that developers leave for greener fields.

Suddenly it becomes apparent that the original creation myth of the platform being the driver of value was a hollow tale from a time long past. Once a platform company switches from being a direct creator of value to becoming a government for 3rd parties, the vast majority of value in the ecosystem is driven by the 3rd parties. When they slip away, one by one, the platform stops being quite so attractive to users. The value that comes directly from the platform is a joke…a handful of ancient features propped up on a gilded pedestal and easily replicated elsewhere. Was email really the killer app for AOL? Are top end 3D graphics really the reason why people played consoles? So then the users slip away as well. Growth slows, the grand mission statement start to feel empty. The platform convulses.

No one kills platforms. They kill themselves through greed and mismanagement. They treat developers like cattle or criminals and then wonder why their grand empire built on the backs of others is dying.

This takes a while. I suspect that a big platform like Facebook is going to be around for decades longer. It will probably outlive your career. But still it is good to know the long arc of history and your place within it.

51

So that was a pretty depressing story. The game is absolutely stacked against you, the game developer. This is an asymmetrical game of power.

But you can fight back. If you understand that that platforms will play power games,you can build a business that survives their ever growing demands.

52

Here’s the simplest and most powerful tool you have as a developer. If there are partners that have outrageous terms, don’t partner with them. If you lack the ability to walk away from any negotiation, you are at a severe power deficit. This is a general negotiating strategy…every time you make a deal ask yourself what will happen if you walk away.

A secondary and equally important lesson: Never put yourself in a position where you can not walk away.

53

Example: I’ve done some work on browser games and have run into web portals don’t allow microtransactions. Or they require you to use their payments, but charge a high taxation rate. Many remove your branding. They remove your outlinks. These relationships may put your game in front of more people, but they do not benefit you as a developer. Even worse, the negotiating and dealing with the portal’s weird little demands sucks up time. They distract you from more meaningful opportunities.

Just walk away. They aren’t worth your time. No matter how tempting those large audience numbers might seem. No matter how many Shirley Temples they hold up as examples of developer success on their platform. If the deal doesn’t benefit your future, walk away.

54

Now you may be tempted by the Publisher and Aggregator weakness card. Here’s the promise: Fragmented developers signs onto a group that protects them and funds them. Instead of fragmented, powerless masses, you are part of a single monolithic organization that can effectively counter the platform.

In the end this merely creates a new umbrella organization that oppresses the developers.

55

EA is the classic example. Over a period of two decades they went from idealistic promoter of developers as stars and artists to a company that was sued for slave shop-like developer working conditions.

Every single week, I get contracts coming across my desk from new portals, publishers, aggregators and operators. They all push themselves as idealistic promoters of developers. But when you look at their contracts and you look at their business plans, they ultimately want to become yet another EA. They want to own your work, own your customers and control what you make for their benefit. Don’t fall into the publisher trap.

56

It turns out that game developers also have super powers. When a platform turns into a government, developers become the primary source of value creation. You make amazing games and players come to the platform to play those game.

Greg Costikyan once noted that games are “Endogenous systems of value”. That means that games creating an internally coherent system of value within their rules. When a player starts playing a game, they suddenly start feeling that those little blocky pixels on the screen have meaning. Where application developers struggle to find some useful niche, game developers regularly and with amazing consistency create valuable services that users love.

This gives the developer access to a wide range of techniques for holding onto their freedom.

59

By gaining multiple sources of customers, you reduce the leverage of any one source. Be an octopus. Tap into multiple sources of customers.

60

My favorite example here is Pop Cap. Pop Cap gains revenue from almost every platform. Facebook has leverage over Pop Cap within its closed garden, but Pop Cap is always judging Facebook to see if they are a valid opportunity. “What can you do for me? Not what can I do for you.” If one platform misbehaves, Pop Cap is only inconvenienced slightly.

Everyone should do this. It radically reduces platform power, increases platform competition and in the long run creates more balanced platforms that better serve customers.

Note that this strategy is the antidote to what happened to LOLapps. If they had differentiated customer sources, they would be a completely different company right now.

61

You have more super powers! Game developers own retention. The best games are activities that users want to pursue for their entire lives. Users keep coming back to them and weave games into their everyday life.

With the shift to running games as services, our super power has grown even stronger. Pretty much all the techniques for building intrinsic player motivation are derived from the game systems and mechanics. You literally cannot retain users unless you have a talented game designer who understands the psychology of play and meaning. Ever wonder why game companies like Zynga are snapping up experienced game developers? They are doubling down on one of their biggest and most obvious competitive advantages.

Publishers don’t have the tools to retain users. Platforms slowly lose their tools as they shift away from directly creating value. The modern game developer building a micro-transactions based game lives or dies based off their ability to retain users.

62

“If the enemy has a castle on a mountain, go build your castle on a different mountain.” Sun Tsu

If you can retain users, why not build a community of users with no middle man involved? Many developers wed themselves to a specific platform’s technology and customers. A thousand other developers do the same and you end up with a blood bath where developers compete against developers and the platform reaps the benefits. Why are you even fighting this battle? You create value and retain users. If you build a strong relationship with your players, you don’t need to build your castle in the same crowded platform as everyone else.

63

Example: Habbo has consistently driven players back to their main site. Portals and platforms come and go, but a good game can last decades. You only need platforms for initial customer acquisition. Players who are passionate fans of your game will happily play on your site. They’ll pay you more money. They’ll value the direct relationship. You gain control over your destiny and a deeper connection with your customer.

Every game developer should do this.

This strategy also improves the platforms. When game developers own their own destination, it does the following: • Reduces platform power, • Increases platform’s respect for developers• In the long run creates platforms at are more like utilities that connect developers and users and less like power hungry warlords. • This prevents developers from leaving and creates a richer ecosystem that is better at creating value for customers.

64

The game developer’s super power is retention.

•What happens if you actively focus on retaining customers for many years?•What happens if you make a hobby that last decades?

Ultima Online has been going for 16 years. Habbo Hotel for 11 years.

65

Here’s what developer victory looks like.

At the center of everything is your game. It is a service that you plan to run for years. You have a community of users that play your game. They come to your site and you have a direct relationship with them. You also have multiple good, mutually beneficial relationships with a set of competing platforms. These relationships are enforced by sweetheart contracts that are clearly friendly to the developer. You uses these platforms to acquire new customers. If any of them start delving too deeply into the extraction phase of their lifecycle, you cut them off and looks for customers elsewhere. You also have competing tools you use to make and monetize your game.

The ecosystem exists to serve you the developer because you ultimately have the deepest relationship with the customer.

Remember when we talked about the players at the start of this presentation? The two most important players of the game of power are the users and the game developers. Year by year, brick by brick you build a tight bond between those two. Play the long game. Play to win.

66

67

Q: What about platforms like consoles that typically require 3D graphics?A: Technology is not a strong differentiator in today’s market. Aim for games and designs that run on a wide variety of platforms including both mobile and web.

Q: Won’t someone who gets good at playing the platform game become an oppressor of other developers?A: It is absolutely possible. I personally have something I keep track of called “Man points”. If you collect too many, you’ve become The Man.

As I mentioned, not all platforms transition into the extract phase. A lot of this appears to be highly cultural. Once you have company that is large enough to have thousands of people, it is really only managed by the philosophy at its foundation. A company like Valve, who is BTW a massive platform owning over 50% of the PC digital download market, appears to be all about making games first and foremost. They don’t generally have the cultural DNA that makes extracting maximum flesh from other developers a large priority. A company like Microsoft however, does have that shark-like DNA, no matter how hard they try to suppress it.

Amusingly, Valve has higher revenue per person than almost any other platform company. If a platform focuses primarily on helping developers create value and doesn’t act like a greedy dictator, it is amazing how the ecosystem can flourish. Yet platforms have a cultural blinder on seeing this. Due to their creation myth as the primary creators of value, they can’t admit that others might be doing more for the ecosystem. That would be like a king giving up their belief in Divine Right.

68