Nexon CEO Owen Mahoney: Game companies say they love innovation but resist creators at every turn

Owen Mahoney has grown skeptical of people who say they love innovation but fail to support creative people. The Nexon CEO brought this up in a speech at the recent Nexon Developers Conference in South Korea.

The thing is that he is kind of casting suspicion on people in roles like himself, as Mahoney is the one who has to decide whether to support the creative game developers at Nexon, which is one of the world’s largest online game companies. But he isn’t telling people to be suspicious of suits like him. Rather, he wants game company leaders to become better at communicating with each other.

In an interview with me, Mahoney said he doesn’t want creators to tell him what he wants to hear. He acknowledges that creating games can be hard, scary, expensive, and complicated. Creators giving pitches in the board room often make the mistake of pitching what they think the board wants to hear. Instead of talking about how they make a game to ride on a market trend, they should pitch a game that no one else is pitching and make the game that they have always dreamed of making.

And game business executives shouldn’t be the ones saying the love innovation and then throw roadblocks in their way at every turn. He said that innovation puts new demands on technology approaches, policies, and procedures for the organizations around them, and even new demands on customers to think in different ways. Fundamentally it requires people to change, to think in different ways. And for most humans, change is really hard. Change is frightening, he said.

And he noted that the irony is that a big impediment to innovation is success, as it can make it more difficult to take the kinds of creative risks required to innovate again. This is The Innovator’s Dilemma, popularized by the late Clayton Christensen of Harvard University. But overcoming these fears is necessary because innovation is essential to growth.

“Roblox, Minecraft, StarCraft, and Maplestory are four examples of highly innovative games that were wildly creative and widely  misunderstood when they first launched, and went on to become massive success stories,” Mahoney said.

Nexon launched Kingdom of the Winds in 1996, a massively multiplayer online role-playing game that pioneered a genre that most entertainment companies want to be in today. He noted that Nexon executive Daehyn Kang pointed out that every great innovation at Nexon  started out as a deeply geeky concept. At the beginning of these projects, the people who developed the idea felt almost silly, Mahoney said.

Kang heads the company’s most passionate geeks in a division dubbed Nexon Intelligence Labs in Seoul. Mahoney reminded everyone in his talk that making great games isn’t just about tools and technique. It’s about a mindset that means you have to move beyond the fear of risk, ridicule, and failure in order to do groundbreaking work.

We talked about this talk and more, like the innovation happening at Nexon’s Embark Studios, which is on a mission to develop massive virtual worlds around new intellectual properties while managing costs through tools such as machine learning.

Here’s an edited transcript of our interview.

The Nexon Developer Conference

GamesBeat: Can you give me some more context about the developer conference?

Mahoney: The Nexon Developer Conference is held once a year. Obviously last year we had to cancel because of COVID. This year we did it virtually. Typically NDC is about 30,000 people. It’s very big. I think GDC is about 40,000 people? NDC’s focus is solely on games. It’s held in and around our offices in Seoul. A lot of people come from different game companies around Asia and the world. But if GDC is the broader game industry, NDC is really focused on virtual worlds and online games and associated technologies and methodologies. It’s very big. We’ll occasionally get people speaking from western companies. We’ve had, in the past, the Dapper Labs folks. This year we had Tom Solberg from Embark speaking. We’re going to be doing more and more of that every year. But it’s typically folks from around Asia.

That presentation you saw — typically, I give an opening speech as CEO of Nexon. NDC started off as just an internal sharing of methodologies and tech and approaches within Nexon. Then we opened it externally as well, 10 or 12 years ago. It’s just grown ever since. It’s quite an event. When we do it live we have an opening speech from me, and then we had a keynote speaker of some sort.

Are you a suit or a creator?

GamesBeat: The topic this year was interesting. It sounds like one of a series of talks that you’ve given to us over the years, too, about how there’s often a misunderstanding between the business side and the creative side of the game industry. How do you view yourself in this context? You wear a suit, or at least a jacket, and you’re a CEO, but you seem to have more empathy for the creative people than for the business side. Are you talking about some of the issues here from more of a creative point of view than you’d normally expect?

Mahoney: First of all, you have to remember the audience. The audience is our game developers. The business of being a game developer is really hard. It’s a collection of people who have a hard job, and who sometimes need to know that there is a line–that the dichotomy between being creative and being successful is in fact a false dichotomy. The most robust companies over the years have been ones who have understood that connection. It may not be the easiest connection to understand, but that connection is there. The door you have to pass through to great and sustainable economic success is the door of innovation and the door and creativity.

In the creative business, including in parts of the technology business, people forget this all the time. They think it’s about a formula, or some sort of financing alternative, or throwing money at the problem. That’s very popular these days. It’s not about those things. The great companies, the ones we all admire, have understood that they need to empower great creative people. First they have to find those people and then they have to empower them. You have to hold them accountable to keep doing great creative work, but when you do that well, great things come about.

The people that I’ve always admired in the games business have understood that very well. I work with some of them. In the west our executive team believes that. We brought Patrick Soderlund into the fold, and he clearly believes that. He’s had both great economic success and great creative success. His team very much believes that. Probably in the east the one who is most recognized for this was Satoru Iwata at Nintendo. He talked about it very eloquently over the years. His hero was Steve Jobs, who also talked about it very eloquently.

We’re talking about people who have very sustainable economic success, and yet 95 percent of the pitches I look at, 95 percent of the discussion topics I see being talked about among executives in our industry, especially if it’s VC or large tech and media companies coming from outside, they don’t talk about this stuff at all. 95 percent of what they talk about is something completely different. That’s a tragedy. In our industry we’ve seen the outcome of when really creative people have the guts to go forward. They do great stuff. Then everyone says, “Oh, games are so hard to understand.” They reason why they find it’s hard to understand, or they think it’s some kind of deus ex machina, they’re not understanding the link between great creativity and great economic outcomes.

Deeply geeky roots

GamesBeat: You don’t want the creative people to curb their pitches to make it sound good to a business person, then? You want them to give a more unfiltered expression of their creativity?

Mahoney: I guess that’s a way to put it. I would phrase it in a slightly different way. One of our senior executives is a guy named Dae-hyun Kang. Dae-hyun is brilliant, and he’s the leader of our intelligence labs unit. Among other things, they’ve applied a lot of AI science to the operation of live games. They’ve done a brilliant job at it. We had a strat[egy] offsite in 2020 where he said, “My view on this is that everything we’ve done that’s been really good has seemed deeply geeky at the time we cooked up the idea. By that I mean it makes you feel insecure, like when you were a geek in high school. If a project we’re working on is not feeling deeply geeky and weird, if a lot of people aren’t going to think you’re really weird for even thinking this, it’s probably not something that’s going to have legs in the long term.”

Everything that’s come out of our industry that’s been really good and really a breakout hit in the last 20, 25 years since I’ve been in the industry, you’re like, “What the heck did I just see? That’s crazy.” StarCraft was like that when it first appeared. Maple Story by us, for sure. Roblox, for sure. You and I have talked about Minecraft in the past. When those products first hit the market everybody said, “I don’t get it.” Look at Roblox. What is it, $45 billion market cap when it went public? To this day people say, “How does Nexon keep doing this?” It happens to us. It happens to everybody. A lot of people have counted Nintendo out many times over the years. So I would phrase it in a slightly different way.

GamesBeat: Are there some things that come out of this point of view that are the takeaways for both the creative people and the business people? The business people should trust the creative people more, maybe? Or are there other conclusions you draw from this?

Mahoney: There’s an enormous variety of different types of people within who are business people or creative people or both. It’s hard to say that there’s one lesson. I’d say for us at least — I’ll give an example. I had a combination of business people and creative people give us a pitch about a month ago where they said, “This type of game is popular in this region. We’re new to doing this type of game, but we’re going to use some methodologies that have been achieved by these other companies and these other gaves we looked at.” I immediately shut it off, because it’s not consistent with our strategy. But the reason it’s not consistent is because they were really describing doing something very similar to what’s already out there. Success almost never comes from that.

The problem is, being a developer is hard. In order to make a geeky or a weird or a new idea, you have to go very far back into first principles and ask yourself, “What is fun? What’s unique?” Then you have to go through all the challenges that it takes to get a product like that fun and improved in the market. The main point of my speech or my presentation was about acknowledging how hard that process is. The easy thing to do in the moment is to say, “We’ll make a game like X and it’s going to have some flavors from this other game Y. We’ll get a small percentage of the market and that’ll add up to paying back our costs.” Those types of things don’t work very well.

What I really hope for our industry, for the growth of our industry, is we have more people who are willing to be different. That’s the main thing.

Nexon Intelligence Labs

GamesBeat: It sounds like this intelligence lab is a deeply geeky thing itself.

Mahoney: It certainly was when we started. The central idea was, Amazon, Google, and other companies have created a bunch of great tools that are essentially available to us very inexpensively. Call it 10 main new tools you can get off the shelf quickly. Then if you have an operating virtual world, these tools can be applied in interesting ways. When you apply them smartly, then they end up having huge impacts on the performance of a live virtual world.

We started taking a look at this closely a few years ago. We thought maybe we’d have to hire some smart AI people to develop our own AI solutions. But we realized the best stuff was all available off the shelf. We needed to wire up all our games together, get the data out of all of them, and start to –instead of using, for example, dashboards to give better information to our live game operators about what works and what doesn’t work, we could actually apply certain tools to free up our operators from having to do the more mundane work of operating a live virtual world.

For example, you know that in a lot of online games, matchmaking is a big deal. Not just in first-person shooters, but we can use FPS as an example. Using our tools we can watch you play a game in the intro level or the training level, and in about 17 seconds we can tell whether you’re new to this game, whether you’re new to FPS in general, and we can figure out your play style very quickly. Then we can match you up with a set of players where it’s most likely to keep you retained in that game over a long period of time.

The categories these machines come up with are ones we never would have thought of. We thought of matchmaking as, if we put you in with a bunch of 15-year-olds who are super good at the game, then you’re not going to do very well. Or maybe you’re much better than the crew of people you’re playing with, so that will make the other people frustrated and quit, and you’ll get bored and quit. But it goes way beyond just leveling the person. It’s also crafting a good team to put you in. Some people like to lay back. Some people like to be very aggressive. The machines come up with this much better than humans do.

Our humans who run these live virtual worlds, live games, can now be freed up to find higher and better uses for their time, more important stuff. We saw this have an immediate effect on our business. That’s one of about 20 different things that we’ve found have been hugely impactful.

Listening to pitches

GamesBeat: If you think back to one of these big meetings you’ve had where you’re listening to pitches, do you remind yourself of something when you’re listening to those pitches? Something about what your role should be? When you get one of those pitches that’s hard, scary, expensive, complicated, what do you try to say in order to bring that kind of thing home or make it into a success?

Mahoney: One thing is, most pitches that you look at are not very interesting, because they’re not very different from what’s already out there. Once you’re into something that looks interesting and creative and different, then the question is, can the team pull it off? It takes not just a bunch of great ideas, but also a lot of — it takes experience in what they want to do. It also takes self-discipline to be able to do it well. They have to be smart and good craftsmen. They have to be technically sound. The other thing you look for is an ability — a smart discussion on what are the unknowns about what they’re trying to build. If they’re trying to do something completely new, by definition it won’t have been done before. There are smart ways to go about that to discover what the unknowns are and how to go about addressing them.

One of the ways to look at this — great game development is not a linear process. There’s a huge amount of iteration to figure out if something is fun. One reason I think that people like to do the same old thing is because the less new the game is, the more it’s a linear process, the more it looks like a movie. They call it preproduction. They talk about production and post-production. Those are movie terms for a linear entertainment type, and therefore a linear process. But the best games I’ve seen have been highly iterative. You start with an idea and a small plan. You hack it up. You test it. You adjust your plan. You hack it up again. You test it. You keep going down that process until you find out if it’s really fun. That makes most people very nervous. It also makes it hard to make a P&L for completion and a timeline and all those things.

Again, if you look at all the great games that have come out of nowhere and blown everyone away, it’s been something completely different. But they’ve had a great deal of respect for that iterative process.

GamesBeat: Have you heard any good pitches yet around NFTs or crypto and games?

Mahoney: In games, no. Some smart people are working on it. But there’s a bunch of hard stuff about that. I don’t want to just take a flamethrower to a bunch of smart people who are working on hard problems. There’s two sets of pitches I see. I’m going to oversimplify here, but one is, “NFTs are hot. Games are hot. Let’s combine the two and then we’ll have something that’s hot squared.” Let’s call that the typical VC approach. And by “typical VC” I mean most VCs don’t really understand the games business. They don’t play games. They don’t understand how games are made. That’s a boneheaded approach.

Then there’s a different type, and they’re asking a different question. That question is, “What is this technology that’s really good, that a lot of people are working on–what does it enable me to do that wasn’t previously enabled? What can I do now that I wasn’t able to do before?” That’s the right question as far as I’m concerned. Out of that question somebody will come up with some interesting answers. We’re not there yet because, again, it’s like VR. It’s like esports. Now it’s like the metaverse, no offense intended. There’s a buzzword and everyone’s excited about it. They read some sci-fi books and use those old metaphors. They don’t spend any time talking about the user experience. But it’s the people who spend a lot of time thinking about the user experience, starting with their own and extending out to their friends and then their customers, those are the people who will come up with something cool. That will take time and iteration.

Pitches that work

GamesBeat: What’s a more positive example, a good example of a pitch you’ve heard that’s eventually turned out well?

Mahoney: One of the best pitches I ever heard was from the Embark team. We’ll talk about that in a few months. I can’t talk about that too much now. The stories that I think are most interesting are — we’re in the virtual worlds business at Nexon, but this extends across the games business. If you want to go back really far, the stories about how games like Robot War came about, how Choplifter came about, the Apple II games, those were true iterative processes. There were no genres in those days.

I’ve had the opportunity over the years a few times to talk–I had a chance, when I was at EA, to spend a lot of hours with Satoru Iwata and Shigeru Miyamoto at Nintendo when they were creating the Nintendo DS, and then afterward. That was really the renaissance the two of them led. They were doing a very iterative process, leveraging what they knew a lot about and focusing completely on the user experience. That was a wonder to behold, to see them come up with some ideas, recognize that the people around them–it wouldn’t immediately be obvious why a dual touch screen was so cool and so revolutionary. And then we saw the success in the market. I’ll never forget that.

I got a chance to talk to Notch years ago, very early on, about Minecraft, because my son and I were playing it when my son was very young. I talked to Tynan Sylvester about the creation of Rimworld and how he exited a big company, went out on his own, and just iterated and tested. And of course Dave Baszucki at Roblox. I met Dave for the first time in around 2009. In 2009 everyone was talking about Facebook games. In those days “everyone knew” that Facebook games were going to take over the games business. Nobody admits to thinking that now, but they certainly believed it then. Then there was Dave and his team doing something completely different.

Of course there’s a number of examples of this at Nexon. Nexon’s Maple Story had its best year ever, basically doubling its revenues, last year. All through the process there’s been iteration and focus on what is really fun for users. Last time we talked, we talked about the reorganization we did at Nexon about a year and a half ago. We shut down a lot of projects and focused our efforts on a small number of what we think are great ideas. Those are starting to come out of the incubator by the end of this year. Hopefully you’ll see us talking about some stuff that you’ll find exciting and interesting.

Embark’s world building

GamesBeat: It does sound like Embark is doing some different things, just from my guesses about their work. I was on a panel at Nvidia’s event, and they were talking about their Omniverse, which is their metaverse for engineers. There was an Embark guy on the panel. He was talking about how useful some of this very futuristic technology for sharing 3D animated objects across a bunch of companies could eventually be. It’s how the engineers are getting their work done for creating virtual prototypes of things they’re eventually going to launch in the real world. It felt like games could somehow benefit from this kind of technology as well. I thought it was interesting that Embark had someone who was a part of that.

Mahoney: I think so. We’re game makers. We’re specific on what our definitions of things are. The challenge I’ve had with the discussion about the metaverse — you’ve probably been one of the most vocal and eloquent people in helping the world understand an important concept, which is that the entertainment industry is changing very fundamentally. It’s going from linear to highly interactive, and from offline to online. Two years ago, when I was talking to investors about this, they said, “Yeah, but Hollywood is still big.” Especially after COVID, people are questioning that a lot less than they were.

This idea that you live in a virtual world for a lot of your time is a very important–frankly it’s very profound. But the challenge I have when people talk about the metaverse is everyone means something different when they’re talking about it, and usually they go back to some old sci-fi tropes. But we’re game makers, so we have to ask, “What is it we’re trying to build? How do we go about building it? Who’s going to build it?” We don’t use the word “metaverse” really, or even “omniverse” in describing what we do. We say that we build virtual worlds. You live in them. They have certain attributes. Those attributes can include a simulated but functioning economy, a functioning political system, a communication system, interactions with a lot of different people. Because they’re games, at their core they have to have this aspect of challenge, which is much more important than even the story.

Within that the question is, what does it look like? What is the challenge for the various players? How do those challenges interact with other players? Who’s capable of building this thing? Are they able to build it? As we test these systems, because they have to be tested among thousands of people, what do we learn in the process of building this? The number of people around the world can do that is sadly very limited. There’s a lot of money going into this concept of this metaverse, a lot of talk about it, a lot of ink spilled, but who’s going to build all this stuff?

I believe it’ll come out of game makers, but it’s game makers being true game makers, meaning not doing something that some VC wants them to do, but doing something that the customers want them to do, that the people who spend their time in a virtual world want to see happen. The people who stay very close to the customers and are willing to innovate, willing to introduce weird new concepts that haven’t been tried before, they’re the ones who are going to own the virtual worlds of 10 or 20 years from now. I strongly believe that.

GamesBeat: Were there any other things you wanted to mention today?

Mahoney: We’re always hoping that the industry attracts and finds and mentors more people who are able to be weird and different and therefore innovative. That’s what that presentation was all about.