What happens when you give a really smart person just five minutes to talk in front of an important audience? We found out at our recent GamesBeat Summit 2016 event, where we had five talented game industry veterans offer their thoughts on lessons for game developers and our theme of “underdogs.”

I had a good time putting together and watching these dynamic, focused talks from some of the wise people of gaming. Our speakers in order:

Tim Merel, the CEO of Eyetouch Reality and managing director at Digi-Capital. He spoke about the reality of augmented reality and virtual reality business models. Merel believes the entire industry will generate $120 billion in revenues by 2020.

Sam Barlow, the creative director at Interlude and creator of the award-winning indie hit Her Story. He spoke about how “imagination is the best game engine.”

Don Daglow, a 45-year veteran of games and the CEO of 4thRing, spoke next about the need for mentors in the game industry. His talk was entitled “Games Industry Mentoring: A Cup in the Bucket.”

Kathy Astromoff, the vice president of developer success at Twitch, talked about the meaning of community in a talk dubbed “Stay Close To Your Community.”

Lastly, Amy Jo Kim, a game designer and the co-creator of games such as The Sims, talked the lessons of breakthrough game development. Here’s both the video and edited transcript of our lightning round talks.

The reality of AR/VR business models

Tim Merel: I’m founder and CEO of Eyetouch Reality. We’re developing a mobile social VR and AR platform. And at Digi-Capital I’m an M&A adviser for AR, VR, mobile, and games.

VR could be big. AR could be bigger and take longer to get there. But there’s almost as much confusion as there is excitement about the market. One of the big questions business models, how folks can make money from all of this. We forecast that hardware, e-commerce sales, mobile network data, voice, and advertising could generate more than 80 percent of all revenue for AR and VR in five years’ time. It might not look like what you expect. It won’t all be about games.

With hardware it’s the strategic high ground for platform changes. VR and AR is the fourth platform change after PC, internet, and mobile. Folks like Facebook, Samsung, Sony, Google, even Apple with the Metaio acquisition, know this. Apple has proven that to devastating effect in the mobile market.

We think there will be a low single-digit hundreds of millions of units installed base for VR in five years’ time. Everything from solutions like Google Cardboard up to high-end Magic Leap mixed reality, with price points from free to a range similar to today’s smartphones. We forecast that $4 of every $10 spent on AR and VR in five years’ time will come from hardware.

Tim Merel, managing director of DigiCapital and CEO of Eyetouch Reality

Above: Tim Merel, the managing director of DigiCapital and CEO of Eyetouch Reality.

Image Credit: Michael O'Donnell/VentureBeat

Moving across to e-commerce, we’ve all seen Alibaba leading an $843 million round into Magic Leap at a $4.5 billion valuation. Why would a Chinese e-commerce company pour hundreds of millions of dollars into a Florida hardware startup with no sales? They, like we, believe that e-commerce could be the largest non-hardware revenue stream for VR and AR. Selling things in totally new ways and taking $2 of every $10 spent on AR and VR in 2020.

Then we move on to mobile network data and voice. YouTube has said that it takes between four to five times the bandwidth to stream 360 video versus traditional video. Somebody has to pay for all that data. On the mobile voice front, that’ll largely cannibalize existing mobile voice. And there I mean voice with quality of service, not voice over IP. Telcos will still be there. More than $1 of every $10 in 2020 will come from mobile network data and voice revenues.

Next comes advertising. As the market scales and gets into the hundreds of millions of users, advertisers will come in at scale as well. That will generate $1 of every $10 in 2020.

Then we start to move into business models that make more sense for games, like in-app purchases. The bulk of downloads will be free, we believe. There will be a place for premium apps, but in mobile and other spaces, in-app purchases – speed-ups, vanity items, and so on – will be a strong revenue model, particularly for games.

From there we look into subscriptions. Folks like Hulu, Netflix, and Spotify have shown that people will be happy to pay month-in and month-out for premium content or ad-free services. Then into enterprise and B-to-B, whether it be medical, military, education, constructure—we’ll see a broad range, more AR and VR, of strong business models. Middleware players will also generate some revenue in B-to-B.

Lastly, into premium apps. Again, for games we think it’s a good business model. You already have an audience of folks who are used to paying up to $60 for their fun. For the high-end immersive experiences on high-end platforms, it’s a great place for games.

In the round, what does all this mean for games? We forecast that around $10 billion could be generated by games for VR and AR in 2020. There’s a discussion about how big could games get and what could be achieved. We think 10 is the magic number. That’s the thing to talk about.

Imagination is the best game engine

Sam Barlow believes imagination is the best game engine.

Above: Sam Barlow believes imagination is the best game engine.

Image Credit: Michael O'Donnell/VentureBeat

Sam Barlow: I’ve spent roughly 20 years trying to figure out how to tell a story interactively. In 2015 I released a game called Her Story, which was kind of the culmination of a lot of that thinking. Her Story didn’t have a mega budget. In fact it probably had the smallest budget I’ve ever worked with. But it managed to capture the attention of a very broad audience. It reached an audience that traditional games have previously failed to reach.

Her Story was distillation, a very extreme take on a lot of the lessons I’ve learned over the years about interactive storytelling. The main thing I’ve learned about storytelling in general is that the number one thing that matters to people about story is how real it feels to them. This is different from realism. This is, does the audience believe the characters? Does it believe the world of your story? This is the most important thing to the audience. If you think about the fact that games are creating a virtual reality, then it seems like games should have this down pat.

I started out thinking, similarly to a lot of people, that telling a story in a game is a new form of storytelling, a different form of storytelling, a revolutionary form of storytelling. If you look at the modern 3D video game, we allow people to explore, in real time, these 3D worlds that are detailed re-creations. They’re virtual realities that you can step into. We’re able to put the player directly in the story. It feels like this should be the Holy Grail. Nothing could be more real than this.

As I’ve learned more about story, though, and as I’ve explored more and more amazing digital worlds, I’ve come to realize something. The most powerful engine that we have at our disposal is the imagination. This is wired directly into our survival instinct. We believe our imagination. We fear our imagination. We act on our imagination, because sometimes it could be life and death. Back when we were little mammals scurrying around, if we saw the grass moving we imagined a snake might be there. We believed that and acted on it because it could be life and death.

We spend more time living in the world of our imaginations than in the world in front of our eyes. The imagination is always going to be more real and more powerful than anything we can put on the screen. This is something classical storytelling knows. Classical storytelling forms leverage and use the imagination. And yet in games, as time goes on we spend more and more money, invest more and more ingenuity, into trying to take over the job of the imagination, doing things that normally the imagination can do. For storytelling this can be poisonous.

Another thing I’ve learned is that ultimately all storytelling is an act of compression. Every story comes down to an attempt to tell the life story of a character. We take the huge, messy thing that is an entire human life and we try to compress it down into two hours of a movie, or three or four hours of a book. What’s wonderful about classical storytelling, it’s a way of experiencing a more intense, more concentrated version of life. That’s what makes it magical.

If you take, for example, cinema, this is a medium that’s built around the idea of taking a visual record of an event and broadcasting it across the screen. The very first movie was footage of a train arriving at a station. But as that medium evolved, as it became a storytelling medium and an art form, the real craft in making a movie is what you don’t put on the screen. You might cut from location A to location B. You might have a cinematic montage. A character walks into the room and you see their feet. You see a character’s gaze staring off, but you don’t see what they’re looking at. You can have an intense character moment between two people, but we don’t hear what’s going on in their head. We just read it in their expression.

The idea of performance is an incredible for storytellers. An actor is one of the most powerful forms of compression we have. You can have an actor trained for years in their craft. You can have a writer who spends years coming up with character details, story details, putting them on the page, and the compressing them down to a single expression. The actor invests that, puts it on the screen, and the audience uncompresses it with their emotional intelligence. It’s hugely powerful. That lives in your brain and becomes more real.

What does this mean for video games, for VR and for AR? Just because we can put everything on screen, it doesn’t mean we should. We need to leave space for the imagination to do its work. We need to embrace genre. Genre is this wonderful tool where, if the audience understands genre, they have this toolkit of understanding. The know the rules and they can fill in the space, building a story with you as the creator. We need to show less so that the audience can imagine more.

Games industry mentoring: A cup in the bucket

Don Daglow, CEO of 4thRing

Above: Don Daglow, CEO of 4thRing

Image Credit: Michael O'Donnell/VentureBeat

Don Daglow: I’m going to tell you a story that’s not really about underdogs, but I’ll explain the contradiction in a moment. My main work, for a number of years, has been advising teams working on games for PC and mobile, working in production, game design, and strategy. But I also serve as the volunteer president for the Academy of Interactive Arts and Sciences Foundation. We offer scholarships and mentorships for students who plan careers in games.

We’ve had the chance, by doing that for a number of years, to learn some important things. We’re now in our third year of matching mentors with scholars. In addition to giving financial support, we match students with mentors. This year, for the first time, more than two years after we started the program, we had scholars come back who were planning games careers after working with mentors in our program. They came back for the first time and served as mentors to other students.

That illustrates how quickly we can create change and start to build the chain of people helping people. When we think about global warming or world peace, we think, “Well, if hundreds of millions of people collaborate, we can achieve change.” We can, and we can do that on faith. But there are places in life where we can achieve change without having to collaborate in the millions to see it. There are places where you can do one thing as one individual and make change that you can see. That’s the most fulfilling thing of all.

What we’ve seen for our mentors is that kind of fulfillment. Even as we take these young people, who are planning careers in games, and we give them these links and this accelerated opportunity to launch their careers in the games business, we’re also giving the mentors a chance to reignite something inside themselves. That’s the lesson we’re learning. We rotate mentors and scholars, so instead of just having one relationship over a period of time, scholars will actually work with multiple mentors with a variety of experiences. That’s been part of the program.

Here’s my ask. It doesn’t take a lot of time, whether it’s with us—there are other organizations that are also organizing mentors with scholars. But I would ask, volunteer with somebody. Find one of these scholars through one of these programs. Sit down and help some of these individuals, because it will give back to you and it will help them.

But most important of all, we’re in a position where for our industry to grow—I’ve done this 45 years, as a gamer. In that span of history I’ve had a chance to see how things happen over time. One thing I’ve seen is, when we don’t pay attention to the future, when we don’t think about where we’re going, we tend to trip and fall. The future is going to be built by bringing in a continuous stream of great new minds, great young creatives, great young business people who will build on the foundations we’ve set.

We need to have that growth. We need to have the face of our industry look like the face of the audience we’re trying to reach. We want to grow our audience, which we still need to do to grow this business. We have to make the colors and the genders and everything else about this industry look like the people we are trying to reach. Otherwise we won’t achieve that growth. The fastest way to do that is through mentoring promising young people who want to come into this industry and achieve that goal.

Whether it’s with our program or somebody else, volunteer. Talk to any of us and help craft that future. You’ll have the chance to see it. That’s why I don’t think of this is as underdogs. I look at students who are now studying for careers in games and I don’t think of them as underdogs. They’re the best and the brightest. We just have to make sure we give them that opportunity, so we as an industry don’t ignore our own future and turn ourselves into underdogs.

Stay close to your community

Kathy Astromoff, vice president of developer success, at GamesBeat Summit 2016.

Above: Kathy Astromoff, the vice president of developer success at Twitch, at GamesBeat Summit 2016.

Image Credit: Michael O'Donnell/VentureBeat

Kathy Astromoff: I’m here to encourage you all to stay close to your community. This topic is very dear to my heart. I spend a lot of time thinking about this personally and professionally. I’ve come up with a bit of a thesis, which is that the closer you are to your community, the more commercial success you’ll have and the more professional satisfaction you’ll have in your life and your job.

What’s a community? We’re not going to do the dictionary definition. Here are some examples. People who play games are not a community. Twitch broadcasters, arguably a community. Speedrunning Twitch broadcasters, definitely a community. People who work in the game industry, not a community. Game developers, arguably a community. Indie game developers, definitely a community.

With those examples in mind, let’s think about commonalities. A community is a group of people who have a shared interest. They’re more or less passionate about it. The more passionate you are about it, the closer you are to the center of your community. I wrote the word “underdog” this morning before I knew it was the theme, so lucky me. A lot of communities are formed out of the nature of being an underdog. If you think about how game development originated, it was a bunch of nerds who had the privilege of working on expensive mainframes. They dared to do the silly thing, making those mainframes play games.

So why should we care? The closer you are to community, the more likely you are to have commercial success. This is informed from two experiences of mine, broadly speaking. One is, in my time at UBM – the parent company of GDC and Gamasutra – I had the privilege of running two groups that were really strong and tight with their communities. One was the game group, which runs GDC, and one was the Blackhat group, which runs an event for hackers and security researchers.

What distinguished those groups from other groups at UBM, the teams that ran those shows were of their community. They participated in their community. They invited each other to their weddings. They were in the mix on all the things that changed the community and they were trying to shape the community for the better. They also set up significant feedback loops to make sure that the community and the product were one.

My other lived experience on this comes from working with developers. You guys will hear from Rami at Vlambeer later this afternoon about how developers who are tight with their communities succeed. The biggest innovation here is letting your community of players see your development process from the beginning, in very transparent and sometimes very painful ways. But the closer you get to that, the more likely it is that you’ll find an audience with your game going forward.

Here’s the other reason why we should care. It’s highly personally satisfying. When you’re a member of your community, it’s rewarding to be not just at the table or listening to the conversation or watching on Twitter, but participating in the conversation about vicious debates, about the changes that happen to the community and what they mean for us. That’s the only silver lining I can think of to being yelled at on Twitter. You’re passionately engaged with the issue at hand, with people who also care about it as much as you do.

Why else is it rewarding? You can contribute to your community’s ups and downs. You have them at your wedding. You have them at your kids’ birthday parties. You’re contributing to GoFundMes when they’re in trouble. It’s a rich way to live your professional life.

In short, how do you know when you’re close enough to your community? When you work every day amidst the human glitter and the human grit, that’s the alchemical process that turns your work into an opus. If you achieve that, you can achieve everything else.

The three things that breakthrough games share

Amy Jo Kim, game designer and startup coach, at GamesBeat Summit 2016.

Above: Amy Jo Kim, a game designer and startup coach, at GamesBeat Summit 2016.

Image Credit: Michael O'Donnell/VentureBeat

Amy Jo Kim: I’m a social game designer and an entrepreneur and a startup coach. I wanted to tell you a few things I’ve learned and crystallized recently in my 20 years working in the games industry, and also in the product industry.

I’ve been blessed enough to work on a handful of breakthrough innovative hits with long-lasting appeal. Not just one, but several. I started with eBay, Ultima Online, the Sims, Rock Band, Covet Fashion, and lately Happify. How many of you have played one of those games? Right.

I also worked on a bunch of products that weren’t breakthrough hits. I was the VP at a virtual world startup. My own startup was not a breakthrough hit. Lots of my clients, I’ll be honest, made a lot of mistakes. I watched a lot of mistakes around me. I noticed that all the breakthrough hits had three things in common, and most of the projects I worked on that were run by brilliant people with great ideas didn’t have those same things in common. Don you want to know what they are?

The first is that you start with your hot core superfan early customer audience. You get them to help you bring your game to life. Then you expand from there to reach your addressable market. I’ve seen so many startups and game companies make this mistake. They want to do something innovative and they want to reach this broad new market, but they start there. They don’t realize that first, because of innovation confusion, crossing the chasm and so on—first you have to bring that idea to life and test it in rough, raw form. Not with your larger addressable market, but with your early superfans.

Second thing I learned builds on that. True innovators, the people that create breakthrough hits — not breakthrough ideas that fizzle – are tinkerers. They prototype uncomfortably early. I’m building on what other people have said. When I was a younger, less experienced game designer, I chafed at the bit. Why are we building all these rough little prototypes and testing them with people who aren’t our addressable market? Why can’t I go build the cool stuff?

It turns out that those early prototypes, lots of small high-learning experiments – to use lean startup language – are a huge factor in success. If you prototype uncomfortably early, you’re finding out as much about what’s wrong with your idea as what’s right. Absolutely key. Which brings me to the third thing. All the successful teams I’ve ever worked with brought their idea to life from the inside out, from the core loop out. They identified that key repeatable, pleasurable activity that on day 21, day 60, day 90 would bring you back.

They started by bringing that to life with a simple feedback loop. Not fancy progress. Not fancy onboarding, which can fool you into thinking you’re further than you are. Every innovative team did that.

Recently I put a step by step system to implement these key habits and shortcuts into an online masterclass. I had to consolidate my thinking. Now I want to tell you about what happens with breakthroughs. I found that if you do these things – if you prototype early, bring it to life with your hot core, and then build that core loop – you’ll have breakthrough moments in your game design. You’ll reach the point where you’re getting honest feedback on your key ideas from exactly the right handful of people.

It’s that one thing—even though it’s uncomfortable, and in fact especially because it’s uncomfortable, that is the common phase that every breakthrough hit with long-lasting appeal I’ve ever worked on followed. I helped Covet Fashion, who are great game designers, do this. It was incredibly uncomfortable, I have to tell you, showing our early rough ideas, but it helped us focus on something we knew people would love. That game, which I worked on right at the start, turned into the biggest hit Crowdstar’s ever had. Three years later it still has 3 million MAUs and its own division of the company.