Data & Dimensions | Ep. 13 - What Xbox could learn from Atari

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Wade Rosen (Cold Open) 00:00:00
I kind of joke that the process of running Atari is like sort of failing toward the light and every time getting a little bit better and a little bit better…

Neil Barbour 00:00:20
Welcome to Data & Dimensions, a podcast at the intersection of entertainment industry and interactivity. I'm Neil Barbour, an analyst with S&P Global Market Intelligence Kagan. Well, I'm just back from Augmented World Expo, where I got to see Snap’s new Specs smart glasses. I got to demo XREAL Aura, which we talked about in last week's episode. And I hosted a great discussion on preserving virtual worlds, which I hope to revisit in a later episode of Data & Dimensions. But this week, I wanted to return to video games. Recently, Microsoft signaled that it was going to redouble its efforts around its most valuable franchises. I'm thinking Halo and Gears of War here and maybe deprioritize smaller development projects. That got me thinking about a conversation I had with Atari and Balor Games at the Entertainment Software Association's iicon conference in April and a similar strategy those publishers were putting together around building out their most premium intellectual properties. Now Microsoft is a much bigger publisher than Atari or Balor. In fact, it's a top 5 publisher in terms of revenue. But I think a lot of what these smaller players are thinking about is relevant to the same market forces that are pressuring Microsoft. As it becomes harder to turn a buck in this market, publishers are going to rally around what they see as their best bets and maybe minimize their exposure to more speculative development projects. Make no mistake, original IP is the lifeblood of gaming. And these smaller publishers are definitely locked in on that concept, but they're also mindful that when something hits, they need to do everything they can to maximize that opportunity. And with that in mind, I'll turn it over to me and that conversation from iicon.

Neil Barbour 00:01:53
Great. So welcome to Owning the Game: Investment, IP Acquisition and the New Economics of Interactive Entertainment. I'm Neil Barbour with S&P Global Market Intelligence, Kagan. I'll be the moderator. And joining me are Wade Rosen, Chairman and CEO of Atari; and Mark Nash, COO and Co-Founder of Balor Games. So put a little frame around this, the overall gaming market is in a precarious position. The industry has struggled to find revenue growth in the post-pandemic era. M&A and fundraising are at or near historic lows. Profitability is starting to recover, but only just. And yet here, we have 2 publishers that have been able to assemble a compelling portfolio of assets. Atari reported a 63% jump in revenue in 2025, owns over 400 franchises and has 4 studio acquisitions in 24 months. Balor Games is a freshly minted publishing label focused on Triple-I games with more than 60 titles in its remit. I want to start by talking about the M&A journey you've both been on. I guess the parallel I see here is that you're both stewards of high-quality but still very nimble development assets. Wade, Atari obviously has a deep catalog, but on top of that, you brought in Night Dive, Digital Eclipse and Intellivision and just recently, Implicit Conversions. How are those assets driving Atari's vision?

Wade Rosen 00:03:17
Yes. So I think the Dev acquisitions were probably the best thing we've done over the last 5 years. I've been here for about 5 years. Actually, this is my 5-year anniversary in April. And the first 2 years, which were the final years of COVID, we were in a turnaround. So the fun and enjoyable times that I think everybody else experienced, we didn't really get to have those. We were in a pretty deep soul searching existential place. But at the other side of that, we -- and I think that was brought on because we didn't really know what we were -- what we wanted to be great at. And it gave us an opportunity to say, okay, what do we want to be best in the world at? And we picked retro. There's these great teams, but they were disparate. There was no scale. And we settled on, okay, we have a brand that enables that. There's this in tech, you oftentimes hear the expression of right to win. So like, okay, that's a space where we have a right to win. We have a brand that can help with that. And now we just need to go put the pieces together. And that's what we did with those acquisitions. Each one of those -- each one of those is best in the world at something. So they're niche, but with Night Dive, it's best in the world at remastering boomer shooters, Digital Eclipse, collections, Implicit Conversions, emulation. And putting those together allowed us to carve out a place in the market where before we were just really battered about the general ebbs and flows of everything video games.

Neil Barbour 00:04:52
Sure. And Mark, you brought together the legacy Humble Bundle publishing assets with the Firestoke catalog. What's the strategic fit you were underwriting there?

Mark Nash 00:05:02
Yes. So I think we look at the investment profile as IP is really more than just a creative content play. It's an infrastructure play. And as we look at kind of connecting these different catalogs together and as we expand in the future and acquire additional and expand the catalog, we're ultimately trying to be a curator, right? Discoverability, game discoverability is a highly critical part of the process. And as we continue to scale and as games continue to -- more and more choice of gaming content is out there, we're building a brand that allows both the games and the gamers to gain discoverability in that place. And then for us, those 2 catalogs specifically, they're highly diverse. They're both visually and creatively innovating. And the budgets of those games allow us to lean into that innovation even harder as we think about what risks we're taking with our portfolio.

Neil Barbour 00:06:04
So let's talk about the priority of intellectual property in these operating models. Wade, why don't you walk us through the process of identifying a really durable IP and then building the environment to -- for that IP to thrive?

Wade Rosen 00:06:20
Yes. So IP means a lot of things. And I think traditionally, when we think of IP, we think of a game or a series. And obviously, Atari is a big brand. It's a very -- it has a place in pop culture. But when I think of IP, I actually -- I think where we've had the most success is viewing IP as that competitive advantage even at the dev studios. So again, we work with a lot of proprietary engines, Digital Eclipse, Night Dive, Implicit Conversions. They all have their own IP. And I think the way that we've helped IP thrive our own Atari series or when we're licensing with our partners and trying to be good stewards of other people's IP is by setting a framework where really anything can thrive. If it's just, hey, we're going to go buy this series and then we're going to commercialize it in some interesting ways. We don't really have a competitive advantage in that. We don't -- there's a lot of people that do a great job with that. You guys do a really good job with that. There's great teams. And so if we want to look at what we do well, it's building an ecosystem where any great IP can come into it and then the output is unique and performs better than if they went with anyone else, including our own. And then we can go make the purchases and the acquisitions. But without that first part, there's nothing to the rest of the evaluation.

Neil Barbour 00:07:44
Sure. And Mark, the other day when we were talking, you mentioned using the whole animal in terms of maximizing the potential of an IP. Maybe spool that idea out a bit for the audience.

Mark Nash 00:07:54
Yes. So I think adding to what Wade was saying, I think thinking of IP and how it fits into the portfolio from an infrastructure perspective. So we're ultimately -- from our perspective, we are trying to lead the way in building infrastructure around our IP, right? I think that's kind of our focus. And that covers many, many different mediums, right? That covers from applying high-quality publishing services and applying that to these projects in very specific ways, right? Not all games are created equally. We have a very diverse portfolio. So it's tailoring the needs to those individual projects so that they ultimately maximize their potential. And then I think in addition to that, when we talk about the whole animal, we're really thinking about that both. It's not just a content play, it's a distribution play as well. So the kind of audience that we are bringing products to are very core gamers, right? These are the same folks who buy AAA games, and they're ultimately so hungry for content. They'll consume that content. What's my next meal, right, from a gaming perspective. So we want to be there to serve those players and those gamers. So we have to make sure we have key innovations in those games so that they differentiate it from other choices they have for entertainment. And then looking at that through -- particularly nowadays through the lens of transmedia distribution beyond just the content itself, but how we price that, how we package it, things like subscription services, bundles, these things are all kind of critical to our journey. We're a little bit younger than Atari in terms of our journey. So yes, we're...

Wade Rosen 00:09:32
I'm younger than Atari...

Mark Nash 00:09:34
Yes. So I think we're ultimately -- there's still some of that ahead of us, right, in terms of maturing that. But ultimately, that's how we're thinking about how we kind of build that infrastructure around AAA games.

Neil Barbour 00:09:46
Right. Not just multimedia, but also the framework with which to deliver the content.

Mark Nash 00:09:51
Exactly, yes. There's platform preferences. There are genre preferences. There are pricing preferences to a degree, right? There's a lot of folks in kind of the core gaming space that will engage with titles in a certain life cycle, right? So it's looking at not only the content from an IP perspective, but the life cycle of that content as well and meeting the audience where they're at ultimately.

Neil Barbour 00:10:12
Yes. That's great. You both seem to have found ways to leverage existing assets to stand up unique publishing models for building on what we're talking about that. Wade, I'm interested to hear about the Atari+ ecosystem and your work with physical publishing, giving you a point of differentiation in like a digital-focused market.

Wade Rosen 00:10:32
Yes. The Plus ecosystem, I'm not sure if many people here know about this. This is an example of really appealing to the niche. And again, when we were in those early years and doing a lot of soul searching and trying to find a pathway forward, Nolan Bushnell actually, this is not me name dropping Nolan, but he is a character, if anyone here knows him. He goes like, I think you need to niche it to death. And I was like, wow, that's pretty catchy. Yes, I like that. And we realized that there wasn't -- there's not a lot of retro hardware manufacturers that also have -- again, it's -- there are some and there are some great ones like Analogue, but there aren't any that have a large brand and major distribution. And one of the early questions we got was, hey, I've got all these old Atari carts, what do I play them on? So the logical answer was, well, let's make a modern Atari to play these things on. And even though we think of these as legacy systems and the Atari 2600 existed so long ago, the reality is we still make games for it now. We make -- and sometimes the games that we make for the 2600 will actually outsell -- we'll do modern versions with modern graphics, versions of the same title release it on PS5 and Steam it will outsell it on the 2600. And so the Plus ecosystem is our hardware piece, but it's really part of a larger -- it's using the whole cow part that Mark said there. When we were looking at Intellivision, I don't know if anyone -- if that acquisition would have made sense to anyone else in the world. And it made sense to us because, okay, we're already doing licensing. We can drop it right into our licensing system. We're already doing hardware components. All right, let's put out a mini Intellivision. We're already making games, and we're making games in retro. Okay, we can put it right into that line. And so yes, that's the ecosystem and that's the motion is -- when we do acquire, it's usually things that we can utilize across all the verticals of the company, software, hardware, licensing and the Plus hardware is one of those verticals.

Neil Barbour 00:12:41
Right. And also when you have a successful game digital focused, you tend to publish a bespoke physical SKU.

Wade Rosen 00:12:50
Yes, great point. And I remember this when we had just acquired Digital Eclipse and Night Dive. I went into a Best Buy, and I was looking at their much diminished physical release, rack. But of those, Nightdive or Digital Eclipse had probably developed 1/4 of the games that were in there. Now they weren't publishing all those, but they would be Teenage Mutant Ninja Turtles, Cowabunga Collection, the Lion King and Aladdin Pack. And we realized like these are the last games that will -- these are the games that will last the longest in physical. They have the most mass distribution potential. So physical has become a growing and larger part of our distribution strategy, but I think that's only because of the niche that we're in. And as people have fled that space, we've moved into it, and it's going well.

Neil Barbour 00:13:41
Do you find -- are there a lot of hardcore fans that will buy digitally and then buy physically as well? Does it create this sort of virtuous cycle or hard to tell?

Wade Rosen 00:13:50
Well, I mean I do that. And I'm a big nerd. So probably. It kind of depends on like if I want to collect it or not, right? I -- we were talking backstage and I was saying I bought a lot of the Humble games and some of them even in physical, like Unpacking and Forager and Moonscars. But I don't -- yes, I do think that still happens. I think where you see it even more is when you put out a Deluxe Edition and there's like a big box around it and there's a Goro statue and a bunch of like -- then it's kind of a shrine, and I do that still with a lot of titles that I like, and I'll see it coming in like, oh, great, like this one more thing to put up on the wall and one more thing for my wife to be annoyed with me about, but...

Neil Barbour 00:14:37
Cool figurine can move a copy of a game. There's no doubt about it.

Wade Rosen 00:14:41
And the figurines always move it, right? Much more than -- those are the winners usually in physical.

Neil Barbour 00:14:45
Yes. So Mark, we touched on this a little bit, but how does Balor think about the go-to-market and distribution today? Where do you believe you guys have an edge?

Mark Nash 00:14:55
Yes. So I think from our perspective, as I was mentioning earlier, we look at the individual needs of those projects, right? We are providing bespoke publishing services to those projects and how we approach it in terms of the go-to-market. I think the thing that we've learned in kind of this post-COVID bump era of the industry is a lot of services are decentralized now. Remote working is decentralized now heavily. So for a smaller team like us, we can kind of lean into those advantages or take advantage of those circumstances. So if we have a -- historically, we may have structured ourselves as a team that was very big and had a lot of talent internal to the team and provided services around that. But we would never be big enough at the scale we're at to cover all the bases that our portfolio and IPs need. So as we're looking kind of towards the future, we're looking at far more project-focused model where we're ultimately able to -- if we're working on, say, one of our titles, Threads of Time, the JRPG, there's retro elements to it, but there's also modern elements to it as well with the game being able to run on Gen 5 -- we want to build the team around that supports that and brings that to market that has the expertise in the background of working on those type of games, whereas another title in our portfolio such as Billie Bust Up, which is a musical 3D platform game, they're not necessarily going to be the same people with the talent and expertise working on those titles. So this gives us the flexibility to provide those bespoke services to the developers and ultimately results in the best outcomes for those games.

Neil Barbour 00:16:32
Yes. Fascinating. And we were talking about is it Wild Blue Skies, which leverages some of the team that stood up Star Fox many years ago. Can we look forward to Wild Blue Skies statues coming out at release as well?

Mark Nash 00:16:46
It's a great idea. I have nothing to announce today on any merchandise. But yes, I mean -- but I think that to Wade's point, I think what that talks to is durable franchises, durable IP, right? The type of consumer that buys our games, they're looking for that kind of community connection with the IP. They don't just want to have a transactional relationship with the developer or the publisher. They want to be part of a bigger community. And socially, that's what they take from discussing the games, playing the game, sharing the game. So all forms of kind of IP expansion, be it a statue, be it a television show, these are all touch points for that community to get a bit bigger. And I think ultimately, the companies that are able to focus on that going forward are going to be the ones that ultimately see the best results with their IP.

Neil Barbour 00:17:36
Wade, why don't you talk about some of the success stories you've had with nourishing an IP either that you stood up or acquired over the past maybe 18, 24 months? I mean what are some big lessons you could take away from those?

Wade Rosen 00:17:51
I mean I could tell you about all the failures.

Neil Barbour 00:17:53
Maybe that will be more interesting...

Wade Rosen 00:17:55
I kind of joke that like the process of running Atari is sort of failing towards the light a little bit and every time just getting a little bit better and a little bit better. But yes, I would be lying if I said a lot of the things we've tried didn't work. And then you'll try something and you're like, "Oh, wow, that really worked. That was great." One of the early attempts was Atari 50, which we did with Digital Eclipse before we had acquired Digital Eclipse. And I think it was the first major game I had greenlit. When I stepped in, we weren't really making games anymore. We had -- it was a strange -- it was a unique time for Atari. We were doing a lot of things and not a lot of them were in video games. And so we had to start from scratch. I think a lot of people here are moving through this time in the market, and they're relying on their back catalog. What I explained to people is we didn't have a back catalog. I mean we had Roller Coaster Tycoon and we had the Atari catalog, but amazing back catalog, but very little of that was being commercialized on modern platforms. So we've had to build a commercializing back catalog almost from scratch. And everything that we do, whether it succeeds or fails, just gets us a little bit closer. And it's great. When we have a success like Atari 50, okay, well, let's lean into that. Let's get a little bit better and do it again. But when we had a lot of games that reviewed well, we thought they'd connect and didn't, that also helped us. So yes, -- Atari 50 with Digital Eclipse, we liked so much. We ended up merging with them, acquiring them. And we just had never seen anything like it. It was the first game I greenlit. And if people know Mike Mika, he's so passionate. I remember I sat down with them, they pitched me and I'm like, yes, let's do that. That's our 50th anniversary game. And I think that was the fastest I've ever greenlit something. But then we also did 6, 7 reimagined games where we took classic IP and worked with great new developers. And some had like mild success, but on the whole, I would say that experiment was not successful. But we're still trying at that. Like it doesn't mean that we've kind of thrown that out and we've said we're not going to do new games. We've just changed the approach a little by little. We have a game coming out in May called Bubsy 4D, which is with this infamous Bobcat that never seems to die. And I never thought I'd make a new Bubsy game, but when we acquired Bubsy, we actually reacquired these assets, one of them being Bubsy, and Good Morning America ran a 3-minute spot on it. I was like, all right, I guess people care about this. Let's look at it. And now instead of greenlighting the projects that we think we want, we really listen to fan feedback, where there's demand. I might think it's cool to do a new Lunar Lander game. I might be one of like 10 people who think that's cool. And then once we take an IP, we'll go—we actually go find the devs in the world who we feel are doing the best versions of those games who are doing really experimental interesting platformers, and then we'll pair those two. So—but we only have that process because we had a lot of things that didn't work before that.

Neil Barbour 00:21:08
Atari 50 is such an incredible product. Thank you. We're coming down to the end here a little bit. Maybe to look forward here, how are you guys positioning these companies over the next 3 to 5 years? I feel like we've kind of talked about the now, but push the story forward, why don't we start with you? What's the long-term road map for Balor?

Mark Nash 00:21:34
Yes. So we're going to continue to expand our catalog. We have—I don't know if many people are super familiar with our story, but we have over 60 titles in our portfolio. When we founded the business, it was on the back of kind of those catalog acquisitions. Cash flow positive day 1, 9 figures in revenue. So we've seen a great amount of success in a very short space of time, operating only for about 14 months now. As we look to the future, I think it's continue to expand our catalog, continue to tie in more distribution options, right, direct-to-consumer and expanding kind of our content reach, right, across the catalog. And then I think when we think about our business model, we're a team that was being built in this kind of post-COVID bump era. And we were able to learn a lot of lessons from our wider industry friends, kind of our own experiences, doing this work at Humble Bundle and my work previously at Blizzard. And I think the biggest probably thing that a lot of people are kind of looking at towards the future is like what is the impact of AI in that, generative AI specifically. And I think we look at our kind of plan and ultimately, depending on where you land on that side of the debate and how impactful generative AI will be to the industry going forward, we see ourselves kind of the plays that we are doing, the optionality that we're creating around these durable franchises will allow us to succeed depending on where that debate ends up ultimately. We're a small lean team that's very deliberately keeping the team focused on kind of project-related outcomes. But a lot of what we do ultimately is identifying creative innovative projects led by humans, ultimately bring those markets. So even if the hypothetical you look at of, well, generative AI takes a lot of friction out of making video games and distills that down to a handful of creators. Well, we're already working at that kind of scope. If you go to the other end of the debate and ultimately, the technology doesn't progress much further than where we are today, then I think what we're predicting is there'll be more scrutiny on budgets, there'll be more scrutiny on the level of risk that investors are willing to take into projects. And again, we're already trying to outsize returns on a much more narrower, more focused scope of products going forward.

Neil Barbour 00:24:01
Interesting. When I think back on the Humble catalog, I don't remember a ton of sequels necessarily, but you keep saying franchise, is that—are you looking forward to spooling success stories out into 2s and 3s as you get on the line with?

Mark Nash 00:24:18
Absolutely. Yes. And I think we get an opportunity. We see so much new IP, right? Out of our catalog, most of it is unique IP. So as we're looking through this, we're able to pressure test that in a—on a bigger scale, on a much more lower risk way really. And then as franchises resonate with the audience, with the communities, we're then able to build on top of that and kind of move into sequels and other forms of expressing the IP beyond games as well.

Neil Barbour 00:24:48
Do you want to talk about the long-term road map for Atari?

Wade Rosen 00:24:53
3 to 5 years out. So I mean, we're—the industry right now is a little bit of survive in advance. So it's fun to talk 3 or 5 years out. I mean we're really— we're thinking day-to-day, month-to-month. But we—I guess the most interesting thing about coming to video game. So I've been in this industry 5 years. I came from tech before this, is 3 to 5 years out, we've— for us, it's kind of set to some degree. We're signing those deals now. We've signed those deals. So if I look 3 to 5 years out, it's about executing. We like where we're going. We've been growing 60% to 70% a year the last 3 years. I don't know if we can keep that growth rate up indefinitely, we can. I mean that will— eventually the cumulative nature of that catches up with you. But I think we've got a good plan. And I think that will last us for a while. I think being the best in that segment and having these teams that are really high performing helps. So it just comes down to execution. Do we like what we have? Can we execute on it? Can we deliver on the dates? Can we provide the quality that people want? The— I think the larger challenge, if I look 5 years or going further out is the retro community is a nice way for us to build a beachhead and to grow and carve out a spot. But then when do we start taking creative risk. And we do that. We take shots here and there and like the Bubsy game that I mentioned earlier. But we also aspire to something more. I mean it's Atari. It's this world-famous brand that the first thing people say when they meet me, they're like, "Oh, Atari, I love Atari. What are you guys doing these days?" And I'm like, oh, okay, that's— I should be able to—I would love if I look 5 years out, that people are seeing us in pop culture, not just in games, not just in an event like this, but that they're encountering them in their day-to-day life that it's not going to be like Nintendo, but that it does kind of have this feeling of an eternal brand and an eternal company that people get to encounter and know about and that they know what we're doing. And that probably requires having a larger presence that might be retail, it might be marketing. I mean it's really countercyclical for us. Like people are shying away from traditional marketing, and we do plenty of digital marketing. But it's— our demographic is—we always say like young boomers to old millennials and Gen X, perfect. So meet them where they are. You might see us on billboards and on the back of buses and radio spots, who knows. So that's what I would love to see further out. I think our game strategy is pretty well locked and I feel good about it, but I'd love to see it as a brand come back into the pop culture in a meaningful way.

Neil Barbour 00:27:45
Can you give us a sneak preview of what Implicit Conversions might be working on? I believe that their wheelhouse is PS 1 era games, I mean?

Wade Rosen 00:27:54
Well, what I can say is PS1 and PS2, actually. So they are we—I kind of describe it as like spikes. I love a company with spike, not personality, but skill sets, spikes where they can go really deep in this very specific thing, and they're just so great at it. And they're an amazing emulation shop and just best in the world at PlayStation emulation. So PS1, PS2, they did a lot of work on the Mortal Kombat collection for us and a number of other games, some of which are about to be announced this year. So it was just—and they were a joy to work with. So it was natural to bring them in. And I think if you have PS1, PS2 games that you love and you want to see come back, come and tell me. We'll try to make it happen. That's what we do.

Neil Barbour 00:28:41
Yes. I'll start making the list.

Wade Rosen 00:28:42
Yes, please.

Neil Barbour 00:28:43
Well, that's great. That's all I have.