Former Nexon CEO Owen Mahoney published a blog post on Tuesday analyzing hype cycles in the video game industry– e-sports, cloud gaming, metaverse, virtual reality and the like. He cautioned readers against falling into these cycles by providing a framework for both industry models and what he calls “fashion audits.” This kind of transparency is unusual for an executive, as Mahoney himself mentioned in the post itself, citing a conversation with a Bloomberg reporter in 2015 in which he was advised No freely express your opinion about virtual reality.
“It’s easy to look back and make fun of everyone involved,” Mahoney said. who left Nexon in 2024wrote. “But the phenomenon of hype cycles in the games industry is actually a serious matter. The consequences of these mass misconceptions were the destruction of tens of billions of capital and thousands – perhaps tens of thousands – of quarries. The extent of the disruption provides an important lesson: a vital skill is to identify and understand hype cycles, and to filter and navigate when they inevitably arise.”
And, according to Mahoney, there is “valuable value” in making fun of the people who promoted these fads, taking the rare step of validating the external criticism that these sorts of decisions often receive. “Making fun of fashion trends and the people who participate in them after the fact is fun, but it's also valuable,” he wrote. “These were not harmless quirks. Bad investments destroyed billions of dollars of capital that belonged to pension funds, retirement accounts and ordinary savers. For those making investments, ignoring questions about the user experience is not just naive, it is a breach of fiduciary duty.”
Instead of chasing fads, these companies and executives could create “what people really want” but instead end up wasting “the time and attention of talented developers and technologists.”
The gaming industry's failed fads followed four trends
Mahoney described a pattern that the industry often follows within these kinds of hype cycles: the “glamor shot,” which is an ideal vision of the product; “fake news”, “grand narrative” about new technology and how it will change lives; the “OK Boomer” phase, in which “consultants publish glossy reports with hockey charts”; and finally “merger and acquisition review,” where a company makes an expensive move that legitimizes the hype.
Mahoney used former Activision Blizzard CEO Bobby Kotick's desire to sell esports to traditional sports owners as a specific example of this model. “He needed income, they needed growth. Team owners saw their kids play and assumed, “In the future, kids will fill esports arenas the same way we filled football stadiums.” Both sides had every reason to believe the hype, even though only the seller made the money.”
He then introduces what he calls a “fad audit”: three questions to ask about a potential fad. He urged executives to consider whether this trend is truly new and improves the user experience. The third question concerns the tangibility of the product: can you try it yourself? “Your own feelings are usually more reliable than the opinions of the crowd,” Mahoney wrote.
Mahoney noted that when several of the industry's biggest fads, including virtual reality, blockchain, the metaverse, esports and cloud streaming, are analyzed through this lens, none of them pass muster.
“Discerning the real from the empty is more important than ever at the start of the biggest hype cycle—and world-altering technological revolution—of our lifetimes,” Mahoney concluded. “This is the task of the present moment and the topic of a future essay.”
