Mitch: 0:03 Welcome to Layer's Licensing In Games Podcast. My name is Mitch and I am here with Rachit. Hello Rachit.
Rachit: 0:09 Hey Mitch. How you doing?
Mitch: 0:11 Well. Itís been a while since we have done one of these. So changing it up today, we are joined by Dani Tran, who is a Senior Associate at Konvoy Ventures. Konvoy is a VC firm that focuses on investment in the platforms, tech and infrastructure at the frontier of gaming. So Dani and the team at Konvoy wrote a really interesting article recently about anime IP and gaming and how itís underutilize. And we love anime, we love IP, we love gaming, so we invited Dani on to speak with us about it. Thanks for joining us, Dani.
Dani: 0:49 Yeah, thank you for having me.
Mitch: 0:51 So most of our publishers and most of the developers we work with on Layer, probably familiar with Konvoy and what you guys do, but perhaps the some of the licensers that we work with, some of the IP owners and brands, they may not be familiar Konvoy and what you do. So could you just start with just a bit of an intro into the firm?
Dani: 1:11 Yeah, sure. So we are - like you said, Mitch - early stage VC that focuses on the tech platforms and infrastructure for the gaming industry. But unlike some of the other groups that focus on gaming, we donít invest in studios at all. We really focus on that tech platforms and infrastructure side of our business. And I think the best way to think about it is that we invest in the future and the future digital social square, as well as where we believe that good tech and game design affect be the most [unclear 1:41] in the future.
Rachit: 1:44 And Dani, what about your role within Konvoy? What do you focus your time? And what was your background before Konvoy?
Dani: 1:51 Yeah. So prior to joining Konvoy, I was on the Corporate Strategy at M&A team at Activision Blizzard. And before that, I was a Management Consultant at McKinsey, but I have been a Konvoy for three years now. And so I am on the Investment Team. So I do everything from initial sourcing and diligence all the way through post investment support. And thatís usually on the strategy side. And I usually do that as a board observer.
Rachit: 2:11 Okay, cool. Awesome. Thatís very helpful. And I am curious, obviously, Mitch mentioned the anime IP article that you put out in the last couple of weeks. We read it a lot in the team. And itís picked up across the industry a little bit. What made you write the piece? Was your interest going in this space? Was that you? Was at the team? Was there a trend that you saw? Why did you do it?
Dani: 2:32 It was primarily for me. And so I have been playing games for a really long time. I have been playing since I was five-years-old. And so my first game was Pokemon Yellow, every single Pokemon we have ever seen. So obviously, a huge fan of that IP. But I also have two brothers and games have been the way that I have stayed connected with them. And our first game was [unclear 2:53]. And so I think when you grow in the world of games, I think itís pretty common to be introduced to those worlds that exists. And so for the answer why now, I think it had a lot to do with the trends that we are seeing with IP be introduced to games, but more specifically UGC platforms. And I think while this has happened in games more broadly, like with premium titles and things like that, the UGC platform elements specifically means that these games are coming out faster and better than ever before. And I think the recent announcement with Dizzy and Epic was catalyzed this as well. I think being an anime fan and so we have seen the growth of anime in the last few years. I think it just makes sense that anime should be next.
Rachit: 3:37 What do you think, I mean, the driver behind anime? I think you mentioned itís 600 or 700 million anime fans. Growth rate is four times faster than the number of gamers in the world. Well, obviously, thatís a larger number in total. For there to be 600 million anime fans, itís clear that itís not just a Japanese market anymore. Itís obviously worldwide. Why is it growing? Is that something catalyzing the trend in the adoption in the fan base around anime?
Dani: 4:06 Yeah, itís really interesting, because a majority of the group is actually coming outside of Japan. I think it really comes down to three things. I think itís accessibility, and it gets fandom and connectivity, and then culture. And so on the accessibility front, and so I think this is something thatís been in the works for a while. I mean, Crunchyroll has had been around for two decades, and they have been working on making anime more accessible to people outside of Japan. And itís still primarily a free platform, so that growth has only continued to just compound over time. On the social side, I think itís so much easier to find and connect with people that share the same interest as you. As being an anime fan isnít isolating anymore. Just like being a gamer, isnít it playing alone at your base anymore. And so like I grew up with platforms like Tumblr and fanfiction platforms, and that kind of thing. But now even mainstream social platforms like TikTok, Twitter, Discord, all these are places to find other anime fans. And I think whether you like it or not, I think anime is just mainstream now. I think the top grossing film in 2020 was Demon Slayer. And I think just like there was a massive shift in the 2010s for gaming, I think it should, itís a lot less stigmatized to be anime fan. They are cool people from traditional cool industries that are publicly massive anime fans, like Megan Thee Stallion just hosted Crunchyroll awards. And then like basketball players and football players, like everyone is very publicly saying, ìAnime is a huge part of the way that [unclear 5:34].î
Rachit: 5:35 Yeah, I think thatís really interesting. It kind of reminds me of how 20 or 30 years ago, I think, what I imagined people thought of games as, right? It used to be fringe entertainment. And now, everyoneís into it. Half the world is playing games regularly. Now with anime, I think, we read a report that Dentsu found in Gen Z in the US, I think, itís like 44% of Americans in the 18-24 range preferred watching anime over the big three kind of popular US sports. I mean, thatís a pretty big change over the last couple of decades. What do you think that means for anime and its broader use and how it becomes more than what it is, in society or culture? Do you have any thoughts there?
Dani: 6:23 Yeah, I mean, I think you said it right there. I think like anime is just gonna continue to be a part of the culture and not just being like, anime and kind of its own little bubble. But itís quite [unclear 6:35] the games that we play, the sports that we watch, other types of shows that we watch. And I think itís just going to continue to be just a part of like art, that no way that we could [unclear 6:44].
Mitch: 6:44 I wanted to segue into some of the numbers, the market for anime, like, how anime has been consumed. And I think you had some really good numbers in the article, from Netflix and some of the stuff from Crunchyroll that kind of talk about the size of that market now and how itís being consumed in the US. So can you give us a bit of an overview there?
Dani: 7:05 Yeah, so the market overall, is about 31 billion, with around 600 million anime fans globally. And these numbers are excluding China. I think when looking at the US specifically, about one in every five people that watch anime. So based on the US population is probably going to be between 60 and 70 million people. But I know that you meant to mention the density report. But the AJA which is the Association of Japanese Animation, is actually publishing their 2023 report on anime industry, just at the end of the month.
Rachit: 7:40 Thatís cool. I guess overall, it doesnít matter. Anime and gaming. Obviously the growth of gaming happening. Thereís a growth of anime has been here. Why do you think they are a natural fit? Is it something about the audience? So kind of the crossover, kind of the Venn diagram of the two that in particular stands out for you?
Dani: 7:59 yeah, I think I mean, thereís a few things. I think the first one is definitely the compatibility with games. I think the number one genre in anime is just like that action and adventure bucket. And I think that translates really well to just like the interactive nature of games. Second, I think the themes that people like about anime are also the things that people like about games. I think both anime fans and gamers like to be able to immerse themselves into these fantastical worlds. And like the rich lore that is typically built with each and I think the last one is definitely the audience overlap. And so I think the 21% of gamers watch anime, like just in any typical week, and then 60% of anime fans classify themselves as gamers. I was actually at South by Southwest earlier this week. There was panel being done by [unclear 8:52] which is a cottonwood folio company, but they are also [unclear 8:54] publisher, and then the other panelists were the EVP of emerging business at Crunchyroll. And what they were saying is that 90% of Crunchyroll watchers, their audience like plays games and like 90% of an audience is just huge, huge overlap.
Rachit: 9:11 You mentioned the Game [unclear 9:13], actually do quite a lot of work in in Roblox and Fortnight game as well. And in the article, you mentioned that the topic or the kind of the space of UGC could be quite a big unlock for licenses for anime owners in this space. Why are you excited about it? And, can you explain what you think might happen here? And kind of why?
Dani: 9:36 Yeah. And so I think just to call it out, I think the strengths of UGC platforms is, you have out of the box tooling and infrastructure, I think that allows developers to be able to really focus on the story, the gameplay, the business model, a lot more than they have been in the past. They donít have to worry about building out a back end or anything like that. And I think that allows for much more rapid iteration. I think on the IP owner side, because of that, and then because of that accessibility, you have access, and you have choice to choose between many talented and experienced developers. I think lastly, itís like you have an audience thatís already like, ready and willing to experiment and play different types of games. I mean, if you look at the anime type in Roblox, I mean, thereís hundreds of games out there. So thatís super interesting. And so I think what I am excited about is, I think right now we are in this phase where their interest is so low. And I think if you are an IP owner, and you strip away the economic upside, necessarily about like monetizing from the game itself, then you think about it just as like marketing. Itís a really fantastic way to market your IP. And so I think just like me, having access to hundreds of millions of kids, people that are about to enter, that 18 to 24 demographic, I think itís just a great way for IP owners to market their shows and IP.
Mitch: 10:59 Yeah, I agree. I think itís like that demographic on Roblox and Fortnight as well as like you are making a lasting impression there where people are, like forming these viewing habits and developing interests that they will take throughout their entire life. So getting your IP, getting anime in front of them at that age, I think is, could be a huge benefit could be a huge unlock. Itís a nice utopia. But I have to ask, because, we deal with anime IP owners, and we know they are extremely protective, probably more protective than most IPs owners. And they have these big panels that go through the approvals process for how their IPs licensed in use. So why do you think that they would jump into this space where they give away so much control?
Dani: 11:50 Yeah, and I totally agree with you, definitely, to an extent, I think that out of the box tech that I was talking about, it does limit what you can do artistically and functionally. So it may not allow that to be completely true to the IP. And honestly, like, the economic portion is huge as well. And I think where I feel like, we may see some growth in the future is that I donít necessarily believe that it necessitates less control. I think like, if anything IP owners have more optionality on who to work with, keeping more ads, and making the decision to kill a project, if itís not working, or the team is not working, like over the span of like weeks or months versus waiting two to three years to wait for a playable. But I do want to see what you are saying. I feel like the gaming media as a whole is still fairly new. I mean, like I said earlier, I think this type of IP, and games like has been around for a couple of decades. But primarily on the premium titles side, I think itís more of the UGC side where you are kind of just like, ìDo you cheat?î You might be just like opening it up to everybody, that sounds really, really scary. But I do think that we are kind of at a cusp of a turning point, I think. As I mentioned earlier, Crunchyroll is working with Game Fam on it. I am not sure if Ricardo talked about this, but they are in beta right now for [unclear 13:13] game. But this has been publicly announced. And so you have these established partners that are really taking that first step, really like being essentially like the guinea pig or setting the precedent of what this IP in these games can look like on the UGC platform. And so, personally, I think, I am more on the optimistic side, I see, like a player like Game Fam and a player like Crunchyroll really being willing to take that first step. And I think, they will follow up personally,
Mitch: 13:44 Do you think that thereís like, a step in the interim as well, that needs to be taken for UGC and like IP being used in UGC as a whole around maybe things being a little bit more template so the approvals processes arenít as rigorous so kind of IP owners being comfortable around like, giving guidelines around like, these are kind of the accepted range of ways you can work with our IP but anything outside of that we need approvals for. Do you think thereís some sort of step in the interim to get to that space?
Dani: 14:17 Yeah, honestly, like kind of a hot take. I kind of feel like the existing games have already been like that. There are so many just like hack and slash games out there that are look and feel very, very similar to one another. So I think that would be my argument, but to actually giving an answer to that question. I do think that to an extent that works, but also I think it really limits the upside. As I am saying like, since so many games have followed have such similar archetype. They have been critiqued, like publicly critiqued by gamers saying that these are almost like rich skins. And I feel like they become repetitive pretty quickly. And like I think to an extent a template approach could work. But I think itís important that they are not cheap [unclear 15:04].
Mitch: 15:06 Yeah, itís like the IP owner needs to be comfortable with the IP being used in UGC. Thatís what underpins it all. So, yeah.
Rachit: 15:17 I think with someone like Game Fam, itís also like, I think UGC as a casual term is one thing, but thereís like, UGC, like Game Fam like a Top 10, Top 20 kind of like Roblox studio. I think even they are like, the IP owner has a level of quality that they expect and can get from the build and kind of the investment in the team thatís building there. I think maybe this is the way that we start to see it. Of course, they get that experience, then they see how the UGC community, within that, the players actually, like interact. And then maybe thatís the step that actually lets them kind of lower the bar over time, they can start to work with more and more developers and studios that arenít necessarily as big as something like a Game Fam.
Dani: 16:03 I think we are talking about like this official path too, to your point, I do think that there has been something happening on Roblox, has been happening in tandem. And so like I said, if you have searched the NFA tag on Roblox, there are hundreds of games that are out there. And so your point, I think thatís how you figure out what you donít want, is like you already test tube, has like this petri dish that has been like built on the Roblox platform till now. And they can like look at these top games and say, ìHey, this was generally okay. This is something that we are seeing across a lot of games. And this is something that we have seen pop up, itís definitely not okay, so like, thatís definitely not [unclear 16:40].î So these things arenít necessarily happening in a vacuum. Itís not just Game Fam thatís building these official experiences right now. There are so many unlicensed games on Roblox right now. And I think that can be turned into a benefit. At this time, you can use that as a filter it, do and donít want.
Mitch: 16:58 Thatís a good point. Thatís a good part.Rachit: 17:00 Do you think in the unlicensed space - you donít have to have a take - But do you think itís better for them as IP owners to just let you know, small creators slide like, similar to in the way that like cosplay exists? And sometimes is unlicensed merge kind of being sold in markets that are questionable? Or is it a better for them to be bad cop and say, like, ìWe only want the stuff with the official kind of license on it, where we have the game.î Do you have a view on what they should be doing with the-- I guess the more community driven UGC, which is, to some extent actually shows the fact that there is an audience and there is like a fan community that wants to build even if they donít have the means to build officially?
Dani: 17:47 Yeah, I actually have two other newsletters on the Konvoy website, one is on cosplay specifically. And that as a medium for fandom, and the other one is just like a general IP thing that really dives into this topic. And so I do have a take on this. And I think like for now, it doesnít economically make sense for them to crack down on these unlicensed games. I mean, as I mentioned earlier, itís essentially free marketing and trying to let sue, everyone thatís using your IP on these platforms just isnít worth the money thatís on the table or itís not worth the time. But I do think that there might be a shift here soon. And I think thatís partly due to UEFI. And because of their alternative business model that is more creative friendly, which means more dollars flowing back to the developer and to the IP holder. And so that math, like marketing verse all that math, could change pretty quickly on the value and these IP holders may decide that they do want to protect and like take their share of the upside.
Rachit: 18:55 Very quickly for a licensor there. Can you explain the UEFI change? And like, ultimately, is it just that monetization is more likely to be possible there? And can you talk through that in a sentence or two?
Dani: 19:08 Yeah. And so the economics on Roblox is much closer to the economics that exists on the Apple App Store, and the Google App Store which closer to like a 70/30 split. But Epic, Tim Sweeney is much more-- The models that he has established for Fortnight, and like the Skins Off Fortnight, all those things and which likely are going to be translated to UEFI are much more creator friendly. And so Epic as like platform, the platform owner is likely going to be taking just less piece of a pie. So if you have $1 that is being made, maybe Epic only takes like 8%-10% of the off instead of 30%, 50%, 70% of that and so more dollars are flowing towards these people that are building on the platform. And licensors that are sharing their licenses on the platform.
Mitch: 20:04 So, one of the things you mentioned in the article was [unclear 20:07], something thatís preventing this big unlock for anime and gaming is the repetitiveness of the gameplay and the genre choices like fighting, action games. They have gotten a fair workout over the years. What do you think of some of the genres or even like game semantics that could be developed better? Where is anime IP underutilized in gaming and even if you were a developer watching this, and you were kind of looking for an out of anime IP, like, what do you think is something that hasnít been done that you think has huge potential?
Dani: 20:47 Yeah, and, honestly, I think thatís kind of the wrong way to look at it. I think genres of anime games have been so limited to like one, like you want to have last action games. So itís just a function of like, I mean, some of the most popular anime, like [unclear 21:03] game, right? I do think that both developers and fans and gamers, itís not just on the developer side need to break out of those expectations. I think that we can have games that look like [unclear 21:16], Pokemon Snap, like those kinds of things, that still give fans just new spins on IP that they love. I think if I step in one genre, I think I am a little bit surprised that there isnít more romance RPG game, just like, based on the player base and the anime, I feel like that, that should exist. But generally, I think like, we just really need a break.
Mitch: 21:42 Forget genre, just like come up with a cool concept. And then, donít start at genre basically, is what you are saying.Dani: 21:51 Yeah.Mitch: 21:52 I canít wait to see those.
Dani: 21:53 I also mean, on the fan side, too. I think like, just to give you an example, I think Spy Family announced that they were going to do a game, thatís kind of more similar to Pokemon Snap. Thatís like kind of what I determined from the news article that I read. But fans read it up in arms, like just being like, ìSo action oriented, why are we getting this game that feels like we just taking the pictures and memories,î but itís like, the games are just a medium to explore stories more. And so yeah, fan needs to break out of that too. For sure.
Rachit: 22:29 Thatís interesting that like, obviously right now it feels like we are led by the anime kind of genre. And so right now we are seeing action fighting adventure, kind of close to what the original form is. But I guess if we look at transmedia kind of like game adaptations of Western IP, like, Marvel Snap is a great example where they have taken the world, taking the franchise and the narrative and turn it into something that, I guess isnít technically what you would expect, and they have taken that CCG element and built around the story that people are looking to explore there. So yeah, maybe thereís a world where we start seeing more and more. Between the two mediums, actually, the timing of anime releases and game releases is interesting, and especially for the fact that a lot of anime are like very long running. Thereís like 1000s of episodes. I think we are on our end seeing a lot more happening in wide service games, firstly, in general in terms of IP integration, but also then specifically with anime, and one that, we have seen a couple times now as Well of Warships with High School Fleet where, itís not something that even the players necessarily expected to drop and then it went really well and they have actually brought it back for the second season, I think. Do you think that live service games and live [unclear 23:52] games are a way that can build that kind of infrastructure or kind of way of working for anime in games?
Dani: 24:01 Yeah, I absolutely agree. I think when you look at even the most successful game adaptations anime, it is still performing like flash in the pan and they donít survive long enough to draw non-endemic gamers. And the scope of these games are also so limited, so thereís just like not enough to do and they get pretty repetitive. And so if they are multiplayer games, there isnít enough player liquidity to replace this and so I think this does a huge disservice to the IP that these games are built on like the depth [unclear 24:34] building is great and so I think that the live service model is like the perfect solution for these longer extended TV-- Just look at like these longer extended TV show adaptations and how well thatís done for passive forms of media. I think slow feeding content to fans that are hungry for it, is absolutely the right way to go. And I mean, personal like I am so used to Jujitsu [unclear 24:58]. There was a huge block of time, that was the [unclear 25:03] of the season, and have to go watch something else, while I am waiting for that season to drop, right, I would love to be able to continue to, like engage with that IP, outside of just re-watching the same season over and over.
Rachit: 25:18 Very interesting. We often hear that people want to launch, a collaborate in game event around the season, but maybe like more offseason collab make a lot of sense to keep players interested in the IP through that break. So they donít fall in love with another anime instead.
Mitch: 25:38 And then to your point around genre as well. Itís kind of when you start integrating anime IP into all these non-fighting and action games. Itís also a way of starting to break out of that mould I think, which is really interesting. Sorry, Rachit, you were saying something.
Rachit: 25:57 Yeah. Follow up on the live service thing, actually. Do you think that is something we will see come over to platforms like Roblox? Right now, I think a lot of the experiences around anime are generally like a whole world or a whole experience around the anime. But then obviously, what we have seen in mobile and elsewhere, itís, the game exists, itís monetizing as a player base, thatís kind of they are doing their thing already anime or the IP comes in. Do you think thatís the model that is likely to win in Roblox and we will have some persistent experiences like, something like Strongman Simulator where thereís already people playing and then they drop into that or do you think, thereís a reason why that happened or is less likely to happen?
Dani: 26:40 Yeah, I think itís more likely to happen to Roblox and I think just because of the ways of interacting on a platform like Roblox looks more similar to what a [unclear 26:50] looks, you take advantage of the player liquidity as a straight. I think these worlds are more successful on a platform like Roblox than on mobile. For example, like I play Clash of Clans, and I have been playing Clash of Clans for like, over a decade at this point. But I canít see who is online, I really only focus on my home village. But when I was playing RuneScape, or when I was playing MapleStory, itís like you drop into this town or the lobby for a [unclear 27:22]. And you see tons of other people. I think that, and overlaying now with a live service model where you are continuously slow feeding content, and quests and new skins and all of that. Itís like, you are feeding into this. And so I do think that it works on Roblox more than the typical mobile.
Rachit: 27:46 I think the way that IPS can work in the anime type of world, I think is also just sort of, itís like, tactile, when thereís something like exciting happening. I remember playing a lot of RuneScape and when there was like a Christmas event, or like one of the top ranked players was around, it was just wild. It was like the servers and the worlds would get laggy. And it would, for some reason be more fun, because everyoneís participating in this thing that is just going wrong. But itís because thereís something happening at once. And so I think you have got this opportunity, like you say, with the player liquidity that you have in these like wells where you can tap into like the collectives buy into the experience rather than just kind of something thatís happening in isolation. So thatís really cool.
Rachit: 32:16 Mindful of time, a couple of closing questions. Personally, on your end, are there any anime IPs that you would love to see in games or that you think are particularly underutilized if they are kind of big or popular or have massive fan bases elsewhere?
Dani: 32:31 Yeah, and so kind of speaking to a genre is that I guess are a little underutilized games I think just like sports anime as a whole pretty underutilized. I love Blue Lock, I am edge on every episode, I love Blue Lock. So I mean, that oneís up there for me, Classroom Of The Elite has been one that I have watched lately. And I think this is not technically an anime, like to the true definition. But I think most like, hardcore Avatar fans have been waiting for [unclear 33:01]in action. Whenever for like way too long. I wonít drop a spicy take on the show yet. But I think avatar is obviously like just such an incredible IP. And I think it deserves like something, some form of content that can really stay true to the original writers.
Rachit: 33:23 Yeah, I think we have seen quite a bit of demand for Avatar on our own quite a bit as well. So I feel like that oneís more likely to happen the sooner than not. Itís just seems like a safe bet and one that like the audienceís is calling out or crying out for.
Mitch: 33:45 New movie next year. So I think that maybe thereís something going sooner than we think. Last question, what do you think with anime becoming such a big part of pop culture now or becoming a bigger part of pop culture. What do you think about the opportunity for gaming IPs to go the other way into becoming anime, particularly where they are very like thematically similar or like the art style, similar things like, [unclear 34:20] or Epic Seven, for example?
Dani: 34:22 Oh, yeah, absolutely. I think, like just look at The Last Of Us, look at the Witcher, I guess, even more similarly, I guess like arcade, I think it would probably be-- And so I think we are like in this era of entertainment now, where I donít think that IP owners should think that each new medium just an outlet for a subset of existing data. I think like this transmedia approach can be expansive. And I think this especially applies to games than these ones.
Mitch: 34:52 Especially when thereís this big world and so many characters, thereís so much content to exploit. Absolutely. 100% agree. Thank you so much for joining us, Dani, that was really fun, really great to get your takes, nothing too spicy and really appreciate you coming up.
Rachit: 35:09 Thanks Dani.
Dani: 35:10 Yeah, thanks for having me
.Rachit: 35:11 Awesome.
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