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Anonymous

Former Senior Director at NCSOFT and Take-Two Interactive Software

The Value of Gaming Intellectual Property

Founder of Massive Entertainment, Ubisoft

Massive Entertainment: Game Development, Design & Monetization

Former Head of UI, Epic Games 

Fortnite Gameplay Design & Monetization

Former Business Director at Overwatch, Blizzard Entertainment 

Esports & The Overwatch League

{audio:0:27:13} How would you describe the difference between the Korean gamer and a US or Western gamer?

{audio:0:27:23} I think the Korean player plays for longer hours. When I discuss with US publishers or Western publishers, they believe the Korean player is really a hardcore game player. But my understanding is a little bit different. The difference is, the Korean player is really good at the controls, so they keep playing the game and they practice how to control. If you see the global competition of the game, the Koreans are really good at StarCraft and League of Legends because they keep playing the game, so they understand the character. They keep practicing and they keep studying repeatedly. But actually, they are not really hardcore. They don’t really try to understand all the philosophy. It’s a little bit different. They don’t really play all different kinds of games. They have one or two preferred games that they choose to play and then they just keep practicing and studying how to control well. It’s more that they are really good on the controlling basis. So gameplaying for longer hours.

{audio:0:29:21} I think the hours are really heavy for the Koreans. Every time the developer thinks that this content will be consumed in three or six months, usually, in Korea, the player has consumed the content in less than one or two months. The publisher is always surprised because they had a six-month plan for this content and it’s all been consumed in between one and three months. Then the user will start to leave the game, because the Western publisher is not really able to support it. I think that is a big difference. Long hours game play and they are just pursuing to the end and they really focus on winning the game itself and consuming fast. Those are the big differences as compared to the other markets.

{audio:0:30:33} Why do you think the US and Western publishers’ IP is so successful in Korea?

{audio:0:30:47} Because it’s really deep. The US and the West has a very long gaming history. Gaming is not just gaming. To develop one really good game, it requires many different things. One is the depth of the story of the game itself and, also, IT technologies and the graphics. In Korea, even though we have 5,000 of history, we are lacking the content. We are good at the IT, on the development and all other things, but we don’t have the outstanding stories to make the game player really enjoy it.

{audio:0:31:51} Now it has been improved a lot, because we are trying to learn from the Western publishers. But we are lacking the content and that is the reason why, compared to the Korean games in the early 2000s, the depth of the game story of the Western game publishers was really good.

{audio:0:32:27} One reason the Korean game was successful, as I said, was that gameplay wise, the depth is really deep in the Western ones, but the behavior is very different. Western publishers and developers, initially, could not understand the behavior. StarCraft was very successful, but then EA couldn’t make a success. The game, in every culture in Korea, is a fashion. They love the game which is loved by their friends. Socializing is a key factor so that is the main chance for it to be successful, because people need to play together.

{audio:0:33:23} I think that is one of the big differences is that the Western player has their own taste. They don’t really care whether their friends play the game or not. If they love the game, they play it. In Korea, one of the big marketing tools, to encourage people to play, is the reference. So people play the games which are played by their friends. We try to target the main influencer and get them to influence their friends to play the game.

{audio:0:34:17} How would you compare Unity versus Unreal?

{audio:0:34:27} As of today, I don’t think there are big differences now. Initially, it was very different. Games started with Unreal, so it was more hardcore, better graphic. Unreal games had the better graphics and performed better with PC and online games. The starting point was very different because Unity started more for the casual and lighter games. Initially, if you compared Unity and Unreal, people always believed that Unreal had better visual quality and the heavy engines. Unity was considered more lightweight and maybe graphically, the quality was not great at the beginning.

{audio:0:35:29} But they have both developed different ways. Unreal is trying to make their engine also usable for the mobile games. It’s still good quality, buy they are trying to make the game engine perform for mobile games. Unity wanted to increase their visual quality, so they developed the Unity engine to perform better. As of today, there are still arguing points. Maybe Unreal has slightly better visualization. But if you compare the engines themselves, the quality is now almost the same. That’s what I believe.

{audio:0:36:21} Coming back to the industrial area, that’s very different. But as engines themselves, I don’t think there are big differences, as a gaming engine.

{audio:0:36:37} Are Unreal starting to really compete with Unity in the mobile game market? How expensive is Unreal versus Unity, for mobile developers?

{audio:0:36:57} We have a different business model. Initially, at the launching period, the developer needed to decide about the one-time payment or some portion of revenue sharing of the game. Depending on how successful the game is, they decide on which way they need to pay for it. But Unity are providing all different types of business models, but it’s a pay per seat. From the moment they need to start developing the game with an engine, they need to purchase it, so that is different.

{audio:0:37:51} When I interview developers, they don’t think now that the cost of development on the engine side, is that expensive. The engine is helping them to develop easily. Unreal is used for the mobile games, but it is more used for the heavy gameplay. Unity is used for the more casual game, but even Unity is able to be used for the MMORPGs games, but people choose to use Unreal for the heavy type of game for the mobile, and for others they use Unity. About 70% of the occupancy for the mobile game is by Unity. That’s the difference. As I understand it, about 60% to 70% of mobile games themselves, is Unity. In terms of market dominance, for the mobile game engine, Unity is really popular and is used by more than 60%.

{audio:0:39:22} Do you see a risk to Unreal pricing the engine for free to mobile developers, because they can obviously monetize via Fortnite with Riot and they have a different business model with EGS and the publishing side of the business? They can then offer the engine at a much cheaper price, potentially, than Unity?

{audio:0:39:51} Going back to the 2000s, Unreal was, initially, a really expensive engine. If they wanted to use Unreal, they needed to pay millions. A million dollars, initially. If they didn’t want to pay a million dollars, then they needed to pay some money and choose revenue sharing. As it moved to mobile games, as you know, mobile game developers are not really rich. So they had to change the business model. The Unreal game engine was purchased by the bigger publishers such as NCSoft, Nexon. They are also being used for the MMORPGs game. For the MMORPGs games, the good thing is, the life of the game is longer, so that’s maybe the reason that Unreal is still not that risky, in providing their business model. Unity is a player, but more in a casual way, with more small developers using it. I think that’s one of the reasons. If there are only limited people and the game is not really successful, then maybe Unreal needs to change the business model to purchasing. But today, the market is still naturally shared both ways. Unreal is still in very good shape.

{audio:0:41:52} Unreal and Epic are not a pure engine company. They are also a game developer and a game publisher. They have had a big success with Fortnite; huge money. Unity is a pure engine company. We are not creating the game itself, so that’s a big difference between them.

{audio:0:42:18} You mentioned that the technology is closer now than it used to be. Unreal has been much more expensive, much more complex to use. You’re saying that, now, it’s actually quite close, in terms of real-time rendering, graphics and that type of stuff. I saw the Unreal Engine 5 released and it looked pretty great. Has Unity really got that level of graphics and ability?

{audio:0:42:46} I think, as of today, we are servicing the Unity engine and I think the HDRP and our quality has really upgraded so much. Now, both Epic and Unity are trying to service ray tracing. In terms of the quality itself, maybe we can compare all the detailed things and, in some areas, Epic is better and, in some areas, Unity is better. Now, in terms of visual quality maybe Unreal, for detailed things, maybe a little bit better, but I think, generally speaking, the visual quality is now very similar.

{audio:0:43:43} Which sectors are you most excited about for Unity’s engine, outside of gaming?

{audio:0:43:52} Actually, everywhere. Now they are so demanding, the simulations, the HMI, and even the ecommerce area and manufacturing and automotive. Almost everywhere; even property areas. Most industries really need it. For the automotive industry now, even the car is changing to the electric car. They are more focused on the interior and not exterior. HMI and all the visualization is very important, but I don’t really know if you are aware that the Unreal engine is really heavy. It’s not really operating on SoC chipsets. But Unity is able to operate in HMI and that type of service required for the engine to operate in SoC chipsets. So if you are going to an HMI chipset type of service, Unity is the only engine able to be operated there. Unity is really dominating there.

{audio:0:45:14} I cannot say which company is using it but I can tell you lots of big automotive OEMs have already started to use Unity to develop the HMI or HMI related to contents inside the car.

{audio:0:45:31} What do you mean the HMI on chip? How does that exactly work for Unity versus Unreal?

{audio:0:45:37} We’re talking about the human-machine interface so if you see the car itself and there is a board with a chipset, then the engine must be operating inside the chipset, to show the visual thing inside the HMI and the contents in the car. But Unreal is, as I said, the heavy performer and that’s why the engine itself is heavier than Unity. When they try to operate Unreal on the chipset side, it’s not really running, because the engine itself is really heavy. The OEM tested both Unreal and Unity but only Unity is running on the chipset side. That’s why Unity is really popular for creating the content inside the car and that is loaded onto the chipset. The car is not like a PC. The HMI-side cluster is operating the chipset service. Now the visual lines have kicked in for the older industry, so Unity is now connected to lots of the PNM systems, like the MES and Siemens’ system. They’ve been used by the big companies or the factory, on the field area. Now they want to connect it to more visual lines. That’s why they are trying to introduce Unity. We’ve got lots of demand from the market, who want to use Unity and develop the older solutions in the platform.

{audio:0:47:36} Can Unreal move onto the chipset or not?

{audio:0:47:40} As I understand it, as of today, no.

{audio:0:47:44} It’s too difficult or it takes too long or too much capex required to move the architecture?

{audio:0:47:51} I do not know all the details, but as of today, Unreal is still too heavy to be loaded onto the chipset; that’s the reason. I don’t know whether Unreal will change their engine. That’s not the only area they are able to be used for industry. Unreal can still be used in many different areas by industry. But there are differences, as I said. Unity is the only real time engine for industry. We are not only providing technology; we are also providing services. As I understand it, Epic is providing really good technologies but they are still not really involved in the service area.

{audio:0:48:42} Unity is developing in the automotive industry, manufacturing and even architecture and civil engineering; all different areas.

{audio:0:48:50} It’s really focused on that?

{audio:0:48:53} We are developing all the plug-ins and templates to help the OEMs. But in Asia, the big difference is that the OEMs don’t have the dev teams inside of their organization, to develop things beyond their main business. That really requires professional services, outside. So Unity is also involved in lots of projects, such as hiring and dev process, to support their needs for the industry. We are not making money like Unreal, in the gaming; we are not gaming competitors.

{audio:0:49:38} Epic used Unreal to manufacture the games and they are a publisher, where Unity is really focused on developer tool and solutions in the engine. How do you price the engine for industrial customers, like automotive or any other industrial business?

{audio:0:50:08} In the normal way, it’s the same. We have many recurring cases. One is, HMI embedded system, where we are charging for installation. If the engine is installed to six million cars, then the price we set will be multiplied by six million.

{audio:0:50:33} Is there a recurring element or is it just an installation fee?

{audio:0:50:37} As a license. The system operates as an installation. It’s a different type of pricing. For development, it’s on a per seat basis, but this is set by the operation in the car, in the system. We call it an embedded license. We have the simulation services and we are providing simulation cloud services. It’s not really relating to the engine but the simulation is connected to the engine itself, but they also need computing power. We have developed simulation cloud services that also benefit industry, and they don’t need to set up and develop simulation cloud services themselves.

{audio:0:51:43} There are so many different types of ways. It’s a more customized pricing, depending on the customer.

{audio:0:51:50} So you would normally charge an installation fee to get the engine in the chipset and then you get services for computing power, or whatever services they may need in the products, on a recurring basis, like every year?

{audio:0:52:03} There are all different types of businesses. There are license fees as we are charging to the game developer. Even in industry, the customer is able to purchase their license and they are able to develop their own applications if needed. Or we help them to customize the engine build. In industry they have their own needs so they cannot just use the commercial engine version. In those cases, we tune our engine for their needs, in terms of customizing the build and they develop the engine for their needs. We charge different pricing for that customizations. As I said, we provide a solution and we charge for the embedded license and computing power. There are many different business models, depending on the needs of the customer.

{audio:0:53:10} Who does Unity compete with for these customers such as automotive or industrial? Is it mainly just Unreal or are there any other competitors that are fighting for this business?

{audio:0:53:21} As I understand it now, the reason the customer wanted to use the 3D real-time engine is, not only for the visualizations but also for the interaction. Now they want to create lots of interactive solutions for their customer. As you are aware, in the market there is only Unreal and Unity 3D. We are still competing in all the areas, within the industry. But I think we are selling the engine with the services, so we are more aggressive in this area. Epic is selling technology more; they are still not that aggressive in terms of services for the customer.

{audio:0:54:23} In Western areas, the OEMs usually have their own developer, so they don’t really need that aspect. But the APAC is different. The customer doesn’t really have their own developer, on the inside. Even if they do have them, they are very small and they are often requiring a professional service for the development. That’s why we are also developing partnerships and we are merging with a solution company. We are also making partnerships with external professional resources, to support our customers in developing their own solution and services.

{audio:0:55:06} Are the customers for the industrial business mainly in Asia? Are there any in the US, at this moment?

{audio:0:55:16} We have so many different customers in the US.

{audio:0:55:20} But they don’t take the services in the US, because they have it internally?

{audio:0:55:24} We are providing the consulting services. Even though they have their own development teams, they need the consulting services for the technology, so we are providing that. Sometimes we are going to the customer, jointly, to provide a professional service. But what I’m saying is, structure wise, the Western OEMs have their own labs and dev team inside, so they want to develop their own solutions by themselves. But still, they are jointly working with Unity for support and technical consultation because the engine is ours; so for tuning and customization of the engine itself.

{audio:0:56:14} As I said, APAC, especially in Asia, if the automotive OEM is a customer, they want to focus on the automotive area and what they are developing and creating. They don’t really want to have to hire a dev team to create simulation and other solutions or some kind of visualizing solution and the content itself. That’s why a car configurator, they want to ask for support from the outside. In order to capture the customer, we also involved them in that area, for ourselves or we hire in our partner and we enter this market together.

{audio:0:57:06} For automotive, for example, it seems as if even that could be just as big a market as gaming, potentially, for Unity?

{audio:0:57:19} We are currently finding a huge potential. The gaming is still one of our key drivers but, as we understand it now, all the solutions that we are providing have been proved by the gaming industry. All the simulation, all the technology which are being used by the gaming industry and now we are using that technology into industry. There is only one difference which is, when the game engine is used in gaming, that needed to serve everybody. So we do not know which hardware they are using it so even though the engine is performing at a better quality, we do some detuning, because it has to operate on any hardware, any spec. The game must be able to be operated at the lowest minimum spec.

{audio:0:58:23} But industry is very different. We are trying to maximize operation with the engine components because these customers are able to invest in hardware and so that’s the big difference. But all the technology has already been proved by the gaming industry. I was working for the gaming industry and so that’s a bit easier for me to help the customers, because I am very familiar with those components.

{audio:0:59:05} What’s the biggest risk to Unity in expanding to new industrial applications?

{audio:0:59:19} It’s not really a risk, but I think it’s a learning curve. As you are aware, Unreal and Unity are all technology companies. They are not really involved in platform operation because we help the gaming company to develop the game. We are not really involved in their platform development or in service or operation. But in industry, the customer wants to use the engine for their operations, service and platform. We are still lacking a bit of understanding in that area so that’s why we’ve developed partnerships to support our customer. Unity needed to have a better understanding as to why the engine is needed for the customer and we need to understand all the circumstances and needs of the customer, in order to help them to use the engine itself.

{audio:1:00:31} If we understand why they are using this, then where there are limitations, we are able to provide our technology to the customer. We need to be on a fast learning curve, for all the different industries. We are trying to create lots of reference cases for the customer and for ourselves because that helps our customer to use it. That’s why, annually, we have a Unity Summit. We introduce many different cases in the Western area, the Asian area, with all different reference cases.

{audio:1:01:20} How do you find industrial customers?

{audio:1:01:29} We use networking and, as I said, we have many industrial summits, to who we invite industrial customers and they’ve been working with small agencies, with the Unity engine before. But now we are here so they know we are here and they contact us themselves. We are also doing lots of webinars and sending out emails to potential customers. We have our partners in regional and local areas so they are linking in with the OEM partners. They have their customer pool and network and they bring their customers into Unity. They are selling the engine sector, within the local area, so they have had their customers and now we are engaging with all different areas.

{audio:1:02:51} Now we are making the case and the customer is aware that the case was made by Unity and then they contact us.

{audio:1:03:02} What’s your biggest challenge today, in taking Unity’s engine to new markets?

{audio:1:03:09} As I said, the demand is huge. I talk to my teams and ask them not to hunt for new projects this month until Q3, because it’s already beyond our capability. We have so many demands from customers but the size of the projects is really growing rapidly. Initially, it was only one application but now it’s a platform and a big solution within the customer organization.

{audio:1:03:49} What’s the average size or revenue, typically? What do they look like? How big are they?

{audio:1:03:59} I think it’s millions. If it’s starting to be installed in the car, then you can multiply by millions of cars.

{audio:1:04:16} No; even a few dollars. If you say six million cars, on a yearly basis; then you have the maintenance business. I’m not saying today we are making that, we really started in 2019, in Korea and 2020 has been very aggressive, in timing. So we believe that in 2021 and 2022, the size of the business will be dramatically growing.

{audio:1:04:59} It’s really that cheap? You can charge $1 or $2 just for the installation and then you have services on top of that, each year, for the cars?

{audio:1:05:09} When we first developed the solution, we didn’t know about the pricing. Once the solution was developed, it became more about maintenance, but it really depends on volume. We cannot fix how much money we charge. If the volume is really limited, then I think we need to charge more. But if the volume is really huge, then I think we can discount a lot. It really depends on the volume, so I cannot say exactly what price we charge for the embedded license. We can be involved in the yearly basis contents and services, where we have developed and improved the system, as well as maintenance. We can make a contract for the appropriation of service, on a yearly basis, supporting their system, to upgrading the engine itself. As I said, if they are connected to the cloud computing power, then it depends on the usage.

{audio:1:06:17} Currently, we are trying to get involved in the factory monitoring system. Because the monitoring and the visualization and the understanding of the situation itself, the controlling, the system must be engaged with Unity and that’s connected to the MES or the Siemens’ system, all the different company systems for the visualization purposes. This is a huge project from the beginning to the end.

{audio:1:06:53} I cannot say how much, how big, but we are pursuing millions of dollars for the cases and the recurring ones on a yearly basis; that’s our target.

{audio:1:07:06} Are you worried about Unreal at all?

{audio:1:07:14} I think, in industry, it’s about who comes first and who is capturing the entire system of the company. Once we are in the customers’ system, it’s not about one simple application. You cannot change it. Maybe me and my colleagues in the US and Europe are really competing but I think, in Korea, I think we are first into the industrial area because we are more aggressive in my region. I don’t really worry about Unreal because performance wise it is very similar but we are more aggressive and we are very dominant in the chipset, the embedded area.

{audio:1:08:14} If Unreal were doing their job more aggressively, I think that would also be a good thing because we are not at a mature stage. We have just started in all these different areas so if the engine isn’t really working, people are beginning to understand it better, then we have more opportunity. The people who are talking about simulation, but if you go to the customer area, they do not know about the 3D and they do not understand what the engine is. They don’t understand what a real-time engine is. It’s still at the early stage, so that’s why I think there is huge potential. They need something, but they still don’t understand what a real-time 3D engine is. Now there is no more competition in the engine area; there is only Epic and Unity, so the potential is huge and everybody wants to use it.