Trip Hawkins went through the wringer, but now the Digital Chocolate CEO is sitting pretty atop the biggest industry trend to emerge in a long time: social and casual gaming.
Trip Hawkins will be the first to admit that his prescience on gaming trends can be both blessing and curse. It obviously paid off in 1982, when he founded Electronic Arts, (ERTS) which today is one of the largest publishers in the industry with franchise properties like Madden football, Rock Band, and The Sims and reported revenues of $539 million last quarter. But in the 1990s, Hawkins miscalculated with 3DO, a company that produced the overpriced console of the same name that would eventually abandon hardware, focus on software, and then file for Chapter 11 bankruptcy in 2003.
Then came reinvention. Hawkins became an outspoken champion of social gaming and focused his energies on Digital Chocolate, the San Mateo-based startup that’s released more than 15 chart-topping iPhone apps, like Crazy Penguin Catapult and New York 3D Rollercoaster Rush. To date, downloads of company games top 100 million, with 25 million new paying customers this year alone.
Fortune met up with Hawkins at last week’s Social Gaming Summit in New York City, where he discussed social and casual gaming’s ongoing disruptive influence on the industry, what he thinks of Microsoft and Sony’s new motion-based controllers, and the long road from profit to bankruptcy to profit again. Here is an edited transcript:
Some people view social gaming as a threat. Is it?
One thing that’s very clear about media in general is that the public wants more social value in their lives. They want new ways to connect with you socially. That’s why they get a mobile phone. That’s why they get a Facebook membership. They’re doing texting, email, etc. So there’s tremendous interest to connect with people, where you can play these really simple, really convenient casual games that allow you to connect with other people. It’s an enormous market. It’s rapidly expanded the market of gamers. It used to really serve 100 million people. Now we’re serving an audience of over a billion gamers, and it’s going to go into the billions.
Who is the typical social gamer? Has the demographic changed or evolved over the years?
I think it’s changed pretty radically. I think most people in the last 10, 20 years would say, ‘Oh, I’m not a gamer.’ Because they know people who have played video games and they’ve looked at people who have played videogames and they go wow, that’s way too complicated. The state of the art games like Madden, Grand Theft Auto… most of us would look at those games and be like, ‘Wow, that’s too much for me. That’s way too complicated.’
With a product like the iPhone, you have people that get a mobile phone and get excited about the content they can get through the app store, and that’s a big change in behavior. Prior to that, everybody thought of mobile phone as a platform for voice. Now they’re realizing they can connect with people in other ways. Of course, a phenomenon like Twitter, that was originally on the PC is now a combination between mobile and PC. So there’s a huge trend. There are more and more people embracing more of these methods of communicating.
So do you think games like your Madden, like your Halo, will become relics of the past? Do you think that social gaming is the predominant future?
I think it’s where most of the customers will be. There’s always going to be a hardcore market that will go for things that are deeper. It’s a little bit like in the 80s and the auto industry. Some people really like to have a car with a stick shift, and you’ll have more control of the car if you’re a really good driver.
Certainly professional racers want to have a stick shift. In fact, they don’t want to even have ABS [anti-lock braking system] brakes. They’re so good at braking with a race car, that they can do it better than a computer. But for someone like me, much as I would like to have the fantasy of driving fast like a famous race car driver, I prefer driving a really quiet, luxurious cabin and automatic transmission, and that’s what most people would rather have.
So as games become easier for everybody to play and they all have this social value, that’s really where the predominant audience is going to be.
Over the last month, we’ve seen traditional console makers like Sony and Microsoft release motion-based controllers like Kinect and Playstation Move. Have you had any hands-on time with them?
We’re really a really big fan of extensions like that. Certainly in my household, we play with the Wii. We’ve had in the past a lot of our own products which use tilt and swivel and gesture with the iPhone and so on. Those are fun exotic features to have and take advantage of, but yet again, it’s not something that isn’t quite mainstream. It’s a little like 3-D glasses.
I have a hard time picturing people trying to do something in a family room at home while they’re using exotic gesture devices or things [that] get interfered with [because] of line of sight or wearing funny goggles where you can’t make eye contact with the other people in the room. I just think there’s a bigger more mainstream audience that would rather maintain the social connection and allow the gameplay to rise to what ever level it can without interfering with that.
And there’s a chunk of the market that wants to swim on the deep end at the pool. They want to have the most advanced technology and they want to do the most advanced things. So it’s going to be interesting to see if devices like Kinect… they should be able to expand the audience also. They should make it easier for more people to engage with console games. The question will be whether the console game industry makes more complicated games or in fact makes simpler games. I think they can actually do both.
Do you see these controllers as a sort of a ‘hail mary’ pass on the part of traditional console makers to try and take a bit out of the social and casual gaming pie?
I think there’s some truth in that. It’s the same way with 3-D goggles at the movie theater. I think the 3-D experience in the movie theater is OK, but personally I find it’s not necessary for me to enjoy the movie. They’re charging a fairly high premium for it, so it’s clearly an attempt to squeeze a little more money out of a customer base that’s not expanding.
When I spoke with Reggie Fils-Aime, President of Nintendo America, recently, he basically said he sees gamers coming back to Nintendo’s quality software after tinkering with social gaming.
I have no skepticism about what Nintendo is capable of doing in the future. They have on many occasions seemed like they were backed into a corner and just used innovation to get out of it.
Nintendo does have a desire as a company to be on their own platforms. That’s their big challenge now. Clearly the public is embracing browsers and PCs and mobile devices and platforms like Facebook. That’s I think a level of competition that Nintendo has never experienced before.
You’ve been in the industry for a while. You founded Electronic Arts, one of the biggest game publishing giants out there. How do you feel the company has performed since then? It seems as though they’re putting out a lot of sequels now.
Well it’s a very big company so I think you have to give Electronic its credit. They do their share of things that are creative. … I think the challenge now for companies like Activision and EA that are fairly large, that have legacy businesses, is that they really need to shift their focus. I think they spend a lot of time trying to protect what was there before, and they’re actually going to be better off if they spend more time looking at the front of the car and not worry so much about the rear-view mirror.
Do you abide by the philosophy that a company shouldn’t be afraid to make mistakes and learn from them?
Absolutely. What I try to tell my people is that we have to be innovative. If you’re going to be inventing something new — nobody’s done it before — therefore you’re going to make mistakes. If you’re not making any mistakes, you’re not trying hard enough to be innovative. On the other hand, let’s make the same mistake only once. Let’s make sure we have an organization of culture where there’s enough communication going on that when mistakes get made, they get surfaced. There’s no blame game. There’s only really the goal of learning so that we progress and make different mistakes next time.
What are the mistakes you’ve made over the years? Is 3DO one of them?
Yes, I’ve certainly made more mistakes than anyone else in the game industry. You just try to pick yourself up the floor and try to be humble about what there is to learn.
Can you elaborate further in the case of 3DO?
Certainly in 3DO’s case, I had very painstakingly built Electronic Arts over a long time period. There were a lot of really good, strategic decisions in the early stages when I founded Electronic Arts, that took years to perfect and mature. And I had a lot of patience about it.
With 3DO, I didn’t do that. I tried to do stuff way too fast, really underestimated and overlooked some key issues about what needed to be done, and I was too stubborn to let go of it when it clearly wasn’t working. It was a very harsh lesson for me. I learned a lot of things about how to go out of business. When you go out of business, you learn a lot about how not to let it happen again if you’re paying attention. I matured quite a bit so that when I started Digital Chocolate, I had a much better idea of what to do.
Moving forward, what do you see a big gaming trend trend for 2011?
Well, Facebook I think is going to get back on the gas pedal and be a growth platform for games. They were in 2009 like nobody’s ever seen. In 2010, they felt like they had to retrench a little bit to deal with the question of game information between gamers and non-gamers that are faced with members and how to organize their ecosystem to satisfy both of those audiences. So they’ve kind of done that now and they’re getting back on the gas pedal to promote and nourish the gaming activity going on the platform.
Facebook will probably expand soon to over a billion members. There’s really never been a phenomenon in the history of media like Facebook.