Building the franchises at the center of gaming | David Haddad

David Haddad, president of Warner Bros. Games, kindly complimented me on stage about building a community that came out for the GamesBeat Summit 2023 event. I joked that we were thinking about renaming the event “D3.”

He laughed and took this as a jab. After all, he’s on the board of the Entertainment Software Association, which runs the ill-fated E3 expo, which was canceled this year. I actually didn’t mean to broach that touchy subject so soon in our recent fireside chat. And I’ll get to that soon enough.

But we brought Haddad up on stage to talk about Hollywood and games not because of its seeming overnight success. Rather, we wanted to hear from him because he has been running the most successful game company inside a Hollywood entertainment studio for close to a decade.

The Warner Bros. Games business (often referred to as Warner Bros. Interactive Entertainment) consists of 11 studios, 10 of which focus on making their own content across multiple platforms. The remaining studio provides backend support. It has about 2,500 people, and about 85% of them are focused on development. It publishes games on a global basis, and it licenses some of its game properties to others when it doesn’t have the expertise. While it sounds huge, I noted that the Call of Duty franchise has more game developers working on it.

And this year, Warner Bros. Games had a huge success with Hogwarts Legacy with more than $1 billion in revenues. Haddad the game from Avalanche Studio had sold 15 million units as of Q1 and it has (as of May) more than 19 million players in the game, including those with multiple accounts. Equally important is the amount of engagement, he said.

The game has had 515 million hours of play, 3.4 billion wizards defeated, and 600 million potions brewed and 32 million hours of broom play.

“It really shows the power of what we can add to a franchise by having a great game behind it,” he said.

He said the game division plays an important role at Warner Bros. Discovery, the parent firm, by making franchises more engaging, more relevant with “lean-in content” in the form of games.

(Haddad made it clear he wasn’t prepared to talk about the controversy around J.K. Rowling, the creator of the Harry Potter series).

I noted that you don’t get this kind of success with a studio inside an entertainment company by pivoting to the newest hype trend. Rather, you get it by building it up over time and taking a long view. You get it by earning credibility with your bosses and keeping that cred as you make big bets on gaming.

“Thanks for acknowledging that, as I think everybody knows, certainly in this room, great game making is not easy. And it’s really hard,” he said. “I think, over time, what distinguishes us in the market of other entertainment and movie studios is we’ve ended up with some fantastic teams, some fantastic studios — some that we’ve acquired some that we built. We found a way to keep those game developers motivated, giving them the tools to make great content and great games.”

Haddad said his job is to navigate around barriers and keeping the game developers focused on what will be the best gaming experiences for the fans. He noted, “We’re focused on our biggest franchises and the role we play in building those out in games.”

I asked why there were so many failures with Hollywood and games in earlier years, and why it’s working out so well now with things like The Last of Us on HBO and the Super Mario Bros. Movie.

“It’s a great question because we’ve seen many versions of that,” he said. “And we’ve seen it in both directions. We’ve seen the ‘see the movie, play the game’ [approach] not work. And we’ve seen ‘huge game, make a piece of linear content.’ We’ve seen that not work.”

The first reason is that the content has to be built for the platform. Warners Bros. can start with great franchises with franchises like DC that have been around for 80 years. The game designers in that case get the world, stories and characters handed to them. But then it’s on them to take that and move it all into a great gaming experience, something that is engaging, and built with quality, Haddad said.

“And there’s been, frankly, I would argue, not enough attention to investment in quality,” he added. “Today, in the gaming space — especially with the biggest franchises being so established and having fans so connected to them — to do something new like Hogwarts Legacy, we knew we had to hit a very high bar of quality and uniqueness of entertainment. And we had to have a long view on investing. And it was not going to be a label slap that was going to get us there.”

While they are no doubt supportive, Haddad’s bosses like Kevin Tsujihara in years past and David Zaslav and JB Perrette today aren’t the sort of people to keep funding failures upon failures.

Haddad noted the company is big with its investments in TV, movies, streaming and games. And while those are great businesses, he said gaming has a unique growth profile and market structure — meaning it hit $184 billion last year and is poised to cross $200 billion this year (Konvoy Ventures).

“Franchises are a great starting point. What we’re talking to my leadership about is just the opportunity for growth because there’s so much dislocation, more broadly, in the entertainment business,” Haddad said. “There are exciting, great businesses we’re in that don’t have growth dynamics to them. And so we’re focused on how we capture the $30 billion to $40 billion of growth that this industry should generate on top of the $200 billion industry we’re in today.”

The meaning of franchise gaming

Asked what he meant by franchise gaming, he noted there are many brands and sub-franchises. he noted that you can’t started with Harry Potter or a huge movie franchise and just assume you’ll end up with a winning game. In the case of Hogwarts Legacy, he said the team listened to the fans. They had been telling Warner for a decade or more that they wanted a place, a world where they could be themselves and live and be in this world.

“That was our North Star on that game. Our goal really is to create gaming franchises like Rocksteady Studios did over a decade ago with Arkham,” Haddad said. “Certainly, there were great movies in the Batman world. There were great comics. There were great stories. But they helped create the definitive melee combat superhero game, and we established a gaming franchise. And so our goal is to really be able to do that. Because, I think as everybody knows in this room, when you’re a publisher, and you’re fortunate enough to have a game, in that status, if you do your job right, as creators, find ways to keep your fans engaged, they will stick with you.”

He added, “It is hard to break in. And it’s a privilege once you do. And then it’s an obligation to the fans.” Game developers have to find a way to keep those fans with content, engagement, mechanics, economies and balance, and systems that keep them enthralled over time.”

I noted that Ubisoft has often described a “tentpole” strategy where they have some big poles under the tent in franchises like Assassin’s Creed. But there are many other poles that hold up the tent. Those are smaller and they’re often original titles that can fit under the tent.

Haddad noted that competition in the game industry isn’t a zero-sum game.

“There’s so much growth that our success doesn’t have to come at the expense of others,” he said. “Compared to other companies, we were newer to this. We’ve been a self-publisher going on 15 years. We didn’t have the established [game] franchises that date back further than that. So we had to really build it.”

And the focus is one franchises that already have existing fan bases, stories, worlds and characters. The real art is in bringing those worlds to life through interactive play that can be immersive and compelling and engaging, he said.

“We try to build around that the right stories and mechanics and gameplay,” he said.

Warner is focused on triple-A console and PC games, but it’s also focusing on mobile. That’s where it has had its biggest success with the Game of Thrones franchise, as it came up with Game of Thrones: Conquest, a game focused fans who like deep strategy.

He also noted Mortal Kombat One is coming as the latest title in the long-running series that is still helmed by franchise creator Ed Boone. When you have a studio and creator that have been creating the games for 30 years, it’s “easy for us to get behind it and focus on it because it has such a position in the marketplace,” Haddad said.

The broader strategy for Warner Bros. Games is to continue to invest in the biggest gaming franchises.

“You have other gaming companies are have pursued and are pursuing original [intellectual property] IP,” he said. “There’s an appetite for that certainly in the market. You do hear about from gamers and our own research about fatigue of only seeing the same game. I do celebrate that on behalf of the industry. But for us, it will be bringing new gaming experiences focused on our own franchises. And making sure again, that it’s true to everything that they love about it, but we’re bringing the quality to really stand out in the market.”

I asked if developers would prefer to work on franchise games or focus on original content to be more creative.

“There’s no one size fits in this business, Dean,” he said. “We’ve had people on our team that really do want something to be creators of something original. And, in that case, even if they’re critically talented, we might not be the right publisher for them. There are other cases where you give the game developers enough agency, enough ability to map their own creation, their own world, their own taste of it, their own version of it, where they feel like they have autonomy. I think getting out of the expectations of ‘see the movie, play the game’ really lets our creators feel like they’re building and creating in a way that’s compelling. But again, there’s not a one size fits all.”

I asked if there was something the company is doubling down on. He said that takes him back to the notion of growth, where there are already three billion gamers in the world and the market is still growing. Those people want to play across platforms and play in a connected way. There are a variety of business models that the company wants to embrace. It launched its beta last year of the free-to-play, cross-platform game Multiversus last year. It ended that beta and the company is “learning a lot from that,” he said.

He noted the company has triple-A assets, strong world building, and experience in mobile games as a service. It has some big games on its roadmap, and it has the ambition and investment to win with big triple-A console and PC games, he said. He noted that the company has tapped into outside development to make its games when necessary.

One thing the company hasn’t done is veer off into the “shiny new things.” It hasn’t talked much about non-fungible tokens, the metaverse or AI.

“It is a very dynamic industry and anybody who thinks that they can stand still and be successful is going to lose,” he said. “There are some categories that you just listed where we’re waiting to see how the market shapes and creates. In some cases, that could be great industries down the road, but they’re just not installed enough or not engaged enough for us to put our scarce” resources into.

He added that the company wants to be seen as innovative in the space. It wants to be seen as putting the right level of fan engagement and innovation into its games, while at the same time delivering what the team thinks is going to work in a market that’s already created.

Asked what he wants more of in five years, he said fans. He noted the company measures the number of gamers it has on a monthly active basis. He said it will measure itself by the size of its global reach among gamers.

“I’m just a big believer, especially with our talented teams, that we will find a way commercially monetize a very large, highly engaged fan base that wants to turn our games into daily active habits,” he said.

He also wants to work with other divisions of the company, as Zaslov has indicated he wants.

“We had a history in past org structures [that were] very siloed,” he said. “We think the market today requires us to actually all come together. And that’s been a very high focus of our CEO.”

As for things like modding and user-generated content, he noted, “The great thing about having built fandoms is they want to [help us add to games] and mod them. We have to get a little sharper on our toolsets to help them do that. But I think ultimately, there’s an intersection there where some of our franchises are so beloved, that they would actually take their time and energy to help us and add to these worlds, in a way. And I just think we’re spending some time thinking about what’s the right way to handle that. What’s the right way to give them the tools? How do we moderate it? I do think that that’s actually a sign of health, that fans want to help create with you.”

Wither E3

As for E3, Haddad was until recently chairman of the ESA and he is still a board member. I asked if he hoped to have events like E3 in the future.

“E3 is great. I have enough gray hair that I was in Atlanta,” Haddad said. “That’s how long I’ve been at it. And I think it was our industry at its best. And I also believe, as we’ve already talked about here today, that this is the most exciting area of all entertainment. And I also think we proved our time with E3 historically, that the industry is better and stronger when it actually comes together.”

He added, “Warner Brothers has a board seat at the ESA. And the ESA happens to have a very important role of advocacy in Washington, DC. That’s very important. But it also happens to own the asset of the three. And I think it’s critical that we find a way to do both of those great things and find a way to bring the industry together in the right way. It has to change. It was built for another time when people were taking purchase orders for packaged software. So that’s how old I am to remember that. But bringing the industry together, having us be a calling card for the world, celebrating this remarkable, amazing industry that has so much growth ahead of it. It’s one of the strongest industries in this country. With global opportunities, we have to find a way to come together and celebrate that.

And coexist in a world that has things like PAX and the Summer Game Fest as well?

“I think that’s one of the big changes that over time,” he said. “It really worked as a business model when it really was just about a B2B event. I think now the fans are a lot closer, it’s more of a direct-to-consumer business. It’s more digital than ever. Fans want to participate. Some publishers define themselves in a very direct-to-consumer way. And so again, that’s all part of getting an E3 business model that actually works.”

He added, “That can really be a call to action to bring us together. But as you have shown here, certainly we want to come together and talk about games. A lot of people are excited about this. There’s a lot of people that missed E3. You’re not the only one. And as an industry, I’m going to continue to say this in my role as the Warner Brothers board member of ESA.”

I said you could call it GB3. He chuckled at that.

Source