Games Workshop Founder: ‘I’d rather be a nerd than follow the herd’ | The Power of Play with Sir Ian Livingstone

0:04You've got to try and if you fail, fail fast and try to be different. and follow your heart and be true to yourself. Treat people well. It's a very collaborative industry. A lot of that's become from coming to defend it as an industry. It's never had the best headlines in some of the national newspapers. And yet I would always say the power of play is absolutely wonderful and a positive for society.

0:29Welcome to Secret Leaders. Today I'm with Sir Ian Livingston, the author, angel investor and founder of Games Workshop. Ian founded Games Workshop in 1975 and has been a pivotal figure in the gaming industry ever since. Games Workshop started as a manufacturer of wooden board games before it turned into the high street icon we still see today. The company is now worth£3.55 billion and Ian is enjoying his career as an author, angel investor and an advocate for digital creativity and later this month will open his own academy in Bournemouth. Ian, welcome to Secret Leaders. Thank you for joining us.

1:09Delighted to be here. So that's quite the introduction. You've done quite a lot of stuff. I'm sure you'll be the first to jump out and point out the world was slightly different in 1975. So I'd like to start with the 60s and 70s. So talk to us a little bit about fantasy in the 60s and 70s. What was that sort of world like? Obviously, now the idea of this stuff with video games. is just prevalent everywhere, this idea of fantasy escaping out of your world and into another world. What about then? Well, in the 60s and the early 70s, clearly there was no digital platforms to enjoy fantasy and science fiction content on.

1:49But there were comics and there were books. Of course, I'd read Lord of the Rings and many comics and loved these worlds where you could escape and do things that you couldn't possibly do in the real world. And I was always an avid games player. I used to play Monopoly at school. I used to play chess for the school. And it was at school that I met my two co-founders of Games Workshop, Steve Jackson and John Peake. And when we left school, went our separate ways and met back up in London and had pretty boring, poorly paid jobs. I used to play ball games in the evening and thought, one day, wouldn't it be good if we could somehow turn our passion of playing games to some sort of fledgling business?

2:27And that's really how Games Watch started in a flat in Shepherd's Bush in 1975. So Ian, it's 1975. You've got three founders, if I'm not mistaken. And one big idea. What was that idea? Like, how did this all get started? You mentioned Shepherds Bush, very close to me. I'm in Kensal Rice, so you know, a few minutes away. Talk to me a little bit about what the magic was. What was the idea? Like, why did you decide you needed to do this? Well, being games players, we thought it'd be wonderful if we could somehow turn our hobby into a fledgling business. But we didn't know really how to do that. So we decided to publish a little newsletter called Owl and Weasel and send it out to everybody we knew in games.

3:12And for some reason, don't know how, but a copy of Owl and Weasel landed on the desk of Gary Gygax, who lived in late Geneva, Wisconsin. Gary wrote to us and said, love your magazine. Here's a game I've just invented. What do you think? and that game was Dungeons and Dragons. And it was in a white box with a very ordinary illustration on the cover, but when you open up that box, it opened up your imagination like no other game had done before. I don't think any game ever will again. It was the first role-playing game in which you're a hero, a wizard, and you explore dungeons, killing monsters and finding treasure, and go in these fantastic journeys of the mind.

3:45So we ordered six copies, and on the back of that order, we got the exclusive three-year distribution agreement for the whole of Europe because Gygax also operates out of a flat in Lake Geneva. Do you think, you know, it sounds to me a little bit like serendipity. Seneca says, luck is opportunity meeting preparedness. And in this sense, you've got three people really interested in the space. And you have this sort of opportunity randomly to connect with someone because of a product you've created. it creates this magic moment in time where you're given licensing opportunity for Europe. It doesn't sound like there was much of a fight for it, right?

4:29It just sounds like it sort of landed in your lap and you were good to go. Yeah, but you may make your own luck. I mean, if we hadn't sent that newsletter out, that wouldn't have happened. And if we hadn't grasped the opportunity to become distributors, it wouldn't have happened. So I think lots of people get presented with opportunities that don't always make the most of it. I mean, throughout my whole life, people said, oh, I had that idea. And I usually say to them, well, why didn't you do something about it? Absolutely. Absolutely. So going back to 1975, we started selling it mail order through our newsletter.

4:58And we didn't have a phone in our flat. Of course, there were no mobile phones back in those days. But there was a public pay phone on the ground floor, which we shared with our landlord. It was always going to be a telephone sale for us. and hear the phone ring and run down the stairs, always too late. The landlord wouldn't be there first and used to hang up on most of the people phoning in because it just irritated him. And that made people even more, wanting to find out more about Games Workshop. And we called the company Games Workshop because John, who was a civil engineer by trade, was actually an incredible craftsman.

5:31And the first games that you referred to at the beginning of this piece was about he made backgammon boards, which I used to sell to game shops before D &D got going. But then D &D really took off relative to the size of our business at the time. And a year later, Steve and I decided to go full time. John was not keen on role-playing games, so he left the company. And Steve and I headed to the States to meet Gary Gygax, TSL, and all the fledgling games companies that were setting up in the mid-70s. This is actually the first time my wife has ever pre-prepared a question for me in any of my interviews with any founder, but she wants to know what your D &D name was because she, it turns out, is a big D &D player and fan, as I learned this week.

6:18Okay, it's Amvar the Barbarian. He's a little bit long in the tooth now, but he's still fighting on occasionally. Very good. All right, she'd like to let you know that hers was Night Monkey. I pressed her for further questions. She didn't have much of a rationale. Okay. And just to finish that off, Steve Jackson was called Crew, but we managed to kill him off quite quickly. But son of crew survived much further than his father. Okay. So, you know, it feels very much like a movement is being born in this moment in time, right? Obviously, Games Workshop, Dungeons & Dragons, like this was, you know, really the start of something different in the world.

6:55Did it feel that way? Well, there was no real industry at the time. We were making it up as we went along and we were able to make many mistakes and not get punished too much for them. We were very naive as business people. We were just driven by passion. We hadn't set off to make money. Obviously, success came along, but that should be a byproduct of doing something they really enjoy doing and what you're really passionate about. So we went to the States in 76, signed up all these fledgling companies, ordered a ton of games, had nowhere to send them to other than to my girlfriend at the Times flat.

7:26And we came back to the UK with no money, nowhere to live and no office. So we go to the bank manager and say, hi, we're the UK agents for Dungeons and Dragons. Can you give us 10 ,000 pounds, please? And he looked at us as rather like a dog watching television, had no understanding of what we were talking about and asked us to leave. So we were quite annoyed about that because why wouldn't the bank manager lend us money? But now, of course, you understand why we were not at all prepared. It's easy to criticize investors saying they can't see what we're trying to achieve. But often the creatives don't know how to present to the money.

8:03And we certainly didn't then. We had no investment memorandum, no cash flows, no projections, nothing other than our enthusiasm. Which meant, of course, that we had to find a small office at the back of a state agent in Shepherd's Bush. And that's the only one you had. It was like£10 a week. But we had nowhere to live. So we had to live in Steve's van for nearly three months, which we parked outside the office. joined the local squash club for a shave and a shower etc in the morning got really good at squash by default led this very triangular life for six or seven months as as we slowly grew the business because everything had to be out of cash flow and we didn't even think about getting equity investment because we didn't really understand what that meant and we didn't want to let go of the business in any way so it's a very gradual growth always hampered by cash flow constraints until 1977 we started white dwarf magazine to replace island weasel and that then brought us a much wider audience we started citadel miniatures in 1978 and we opened our very first retail store in april 78 and that was really a big changing big moment in time for the for the business at this point taking no investment in no investment in no none and you talk about cash flow but i guess i'm interested you know back then you're creating like wooden board games right No, the board games didn't last very long.

9:24We gave that up as soon as D &D came along just about, not long thereafter. And so it was then Steve and I and John left the business. But that first opening of the workshop store in 78 was this big moment. And we thought, we really are into something here. And I think that time we were then eventually able to get a bank loan and expand the business. But we didn't have any equity investment. And then a year later, our three-year exclusive had run out with Dungeons & Dragons. And Gary Gygax came over and said, I want to merge these two companies. TSR, his company, Games Workshop, us, and we'd be given a third of the new co, the combined entity.

10:06But being independent young Brits and not wanting to spend half our time in 90 miles west of Chicago, we said no to that opportunity. Which meant, of course, that we lost exclusivity to D &D. whilst we remain the largest distributor, we lost our exclusivity. And we suddenly realized that we need something else to replace D &D. I think that's one thing that stuck with me all the way through my business life in games is that intellectual property ownership is so important. Not only do you only control your own destiny, you increase the value of the business, a much higher multiple if you were to exit.

10:40In the games industry in particular, you often see in video games that studios and developers have to trade away their IP for project finance, which is a great shame in my mind so if you can hang on to it great so that's really how warhammer came about we started off publishing designing board games and ultimately warhammer came out of citadel studios that was our our miniatures factory up in nottingham and then i carried that forward of course i'm sure you'll ask about it more but moving into eidos into video games from tomb raider hitman championship manager deus x these are all games that we own the ip of and therefore you also get incremental revenue from licensing and merchandising the Tomb Raider film for example so IP ownership's always been on my song sheet.

11:24So we're going to talk about IP ownership I'm surprisingly excited to talk about it well didn't think I'd be saying that to anyone I usually have to talk to my own trademark lawyers at my company Heights and it's my least interesting one of my least interesting conversations I might have over a quarter yet today I'm actually really excited to talk about it but maybe that's because I'm talking to an entrepreneur not a lawyer it's always more fun so just coming back to that moment you obviously in life we're presented with opportunities and they can go either way sounds to me like you actually had a really good relationship with Gary from Dungeons and Dragons and when he came over and made this offer to you can you I mean I know it's a long time ago but can you actually reflect back and remember you know how did this make you guys feel like you know telling the story about being three guys and then two and then squash court and 10 pound an office it's like one of the biggest games in the world and someone who's so impressed with you and he comes over to the UK to make an offer to you to merge and then actually the conversation and the decision to turn it down I'd love to know a little bit more about that moment because was it an easy decision for you was it not were you flattered did you care did you have any sort of awareness of I guess the impression you must have made on another person another business well he'd become a friend over time it's not so we hadn't seen him during those intervening three years we went to the states quite a lot and he occasionally came over here so it wasn't a a kind of corporate america confrontation conversation it was very amicable conversation although he was surprised and disappointed that we said no and not happy obviously and his two fellow directors the the Bloom brothers were very unhappy about it.

13:07And he did say, listen, we're going to have to set up TSR UK if you turn down this opportunity. And we said, understood, but we want to remain independent. And so for the next 18 months, we remained the largest distributor because people, shops came to us, not just for D &D, but for all the other games companies that we represented. Games from like RuneQuest and Traveller and a whole range of various board games and role-playing games so they could get the whole lot from us. and White Dwarf Magazine and Citadel Miniatures. So we knew we weren't going to lose our trade sales. All we lost was our exclusivity.

13:41But in the meantime, we started making our own board games like Talisman and Judge Dredd and a whole bunch of other games that we published under license from the US. But again, the big moment was the launch of Warhammer. It sold out almost immediately. Brian Ansell was the managing director of Citadel Miniatures and he reinvested in that title and did a second set quite quickly. And then by 1987, Warhammer 40 ,000 came out and the rest of, they say, is history. So growing up, I was just a humongous. Warhammer and then Warhammer 40 ,000 and then Necromundia and all of these games, they really played a massive part in defining my childhood.

14:26And I always felt like when there were times when you wouldn't necessarily fit in with everyone else those games were a really good opportunity to find your tribe because I think what was interesting about certainly Warhammer 40 ,000 which I was really into for many years for me that game was always like people were either really into it or just not at all like they just didn't get it and like who can be bothered to spend all that time doing that and painting the characters and all of this stuff or you are just super into it so in a way I like when I was younger I just remember like it almost like helped me make friends I don't know have you ever had like customer feedback about that or you can relate to that but I always felt that way I felt like there was a sort of social aspect to it where you would find people who wanted to play it with you and you know and lots of people who just didn't and you would just tend to bond with the people who really did well play is natural when we arrive in this world we learn through play and society used to tell us that when you get to a certain age you should stop playing and I've never been signed up to that at all.

15:28I think play, never too young to start, never too old to stop playing games. It should be a lifelong enjoyment and whether it's board games or role-playing games or video games or e-sports or tabletop games or Warhammer, it's great social fun and why wouldn't you? And it's easy to describe people as geeks or nerds or something. I'd rather be a nerd than follow the herd in many aspects of life. It's, for me, play is just a wonderful experience. And there are so many things around play that people don't even talk about. The power of play in terms of learning and social connections. In video games, what's happening, it's not a passive experience, it's an interactive experience.

16:12You're learning, you can't get through a game without problem solving. You're learning intuitively, you're not punished for making a mistake. Games are very creative. A game like Minecraft, a child can learn contextually by applying the heat of a furnace to silica sand. They can make glass, take that glass and put it in their environments. Games are often management simulations, even Rollercoaster Tycoon. The physics are building the rise, the pricing required to make it an economic successful, the staffing levels. These are life skills, a management simulation whilst you're having fun. So what is absolutely, is there anything wrong with that?

16:47Absolutely not. So it's no surprise the video games industry is now worth$250 billion a year. There are 3 billion people playing. They can't all be termed as geeks and nerds. Games, you know, way, way more part of society, culturally, socially and economically than most people are ready to admit. Yeah, it's funny you mention Rollercoaster Tycoon. I've said in another interview, I honestly feel like I learned how to be an entrepreneur and learned how exciting it was to be an entrepreneur by playing both that and Theme Hospital. I used to absolutely love those games. And, you know, to your point, I think you're right.

17:19I think you can play a variety of games and actually pick up on this. I'm interested in this kind of skill where I'm interested in this kind of thing or not, right? So meandering back to your story. If I'm not mistaken, you started, you said in 1975, is that right? 75 with workshop, first shop in 78. First shop in 78. And then in 1991, is it? You exit the business. Yes. I'd like to understand a little bit about that journey for you. Because there's a few things that are interesting. One is, I'm sure you have opinions of as an angel investor, but typically I'm an angel investor as well. So typically if I advise startups, especially young entrepreneurs, I'm like, you just got to expect that you're going to be in this business for 10 years if it goes well.

18:08So don't listen to the narrative of like the two, three year exit, whatever. It's just ridiculous and so rare. That's more likely if it fails, maybe it'll be sub five years, but you've got to be able to imagine and you're in this business for 10 years. For you, you know, 1975 to 1991, it's actually a very long time in that kind of timescale. So I guess I'm wondering, how did it come about and how did it feel to you to leave the company that you started? Was it something that you actually wanted to do so you could explore new things? Did it sort of just fall in your lap and come together? I'd love you to share, was it like exiting a company in 1991 and what were the sort of cultural feelings you had around it and how do you think they're different to what you see today in entrepreneurs?

18:53Well, to your first comment, I personally would never start a company looking to exit in three years. I'm looking to start a company because I want to be in it for a long time because it's going to be based on something I really enjoy. And that's always been my mantra is to do what you enjoy doing. If you can possibly turn it into a business, please do. But how we came to sell out was a not on a whim it was part of a 17-year process that led to that in 1982 steve jackson and i started writing interactive game books called fighting fantasy and they were a global phenomenon they sold over 20 million copies these were a branching narrative book with a game system attached to them kind of a distillation of a role-playing game into book format broken into 400 paragraphs at the end of each paragraph the reader make a choice they were the very first interactive books with a game system attached to them titled like warlock firetop mountain forest of doom city of thieves and they were translated into over 25 languages sold into over 35 countries and they got a whole generation of children reading they were game books and steve and i were being sent on author tours around the world by penguin books because they weren't published by games workshop our own company and so going to australia and the united states and new zealand and Japan and all over Europe and trying to write books at the same time as running a business that was expanding was causing a huge strain on our personal lives.

20:18Running workshop during the day, going to now our respective homes and writing books to like two in the morning and then having to be away for 10 days on an author tour. And that's why we appointed in 1996 Brian Ansell who was MD of Citadel Miniature as group managing director to allow Steve and I to be not so involved on a day-to-day basis. And that carried on until 1991 when the management buyout proposal was presented to us, not by Brian himself, but by Tom Kirby and a private equity company. And Steve and I, of course, being massively emotionally attached to Games Workshop, were less inclined to sell out entirely.

20:59But it was a stipulation of the private equity company to do so. And so Brian, Keith Pinfold, who was another shareholder, was the financial director, Steve Jackson and I, sold out to the MBO, and they floated the company two years later. And as you've pointed out quite painfully, that Games Workshop is now worth three and a half billion pounds. So some might say we sold out a little early in 1991, but absolutely no regrets, because in 1984, I'd acquired equity in a video game startup studio called Domok and with some of the proceeds from the sale of workshop I invested in Domok, joined as vice chairman, realized that the company was undercapitalized so we put four companies together to create Nuko Eidos which we floated on the London Stock Exchange in 1995.

21:52I became executive chairman of the group and we acquired the other company the only other company in listed in the space which is called center gold and with center gold came laro craft which is on development and i saw laro six months before it was finished and we bought the company launched tomb raider in 1996 i think we had 100 000 units in the budget and sold 7 million copies over time of just tomb raider one so you know i i didn't look back at all whilst there was a bit of an emotional rift at the beginning when we sold workshop just carried on because i was still in games with finding fancy game books and now with video games and eidos but it was an amazing time the early years of games workshop i mean describe the whole thing in a book i wrote which published last year called dice man which is the origin story of games workshop tells all about the van and on the road going to the states and all the mistakes we made and um in a kind of personal memoir, a lot of fun stories, as well as the business side of the early years of workshop.

22:56So coming back to the moment then that you did decide to sell. So the number that's reported is 10 million pounds. Is that correct? Well, it's never been publicly disclosed, but it was between four of us. It certainly was no more than that. And it was less, but it was certainly no more than that. There's something that I don't understand, which is like often, often with private equity buyouts and stuff yeah it all makes sense uh get rid of get rid of people have the total ownership have the ip obviously and then the capital to grow it in your case it seems a bit of an unusual choice because um having the founders out you guys were from what i can understand it like certainly the chief storytellers um this is a business of stories so i find that to be quite an unusual scenario and perhaps as someone who's been involved in gaming all your life where you can appreciate the value of great storytelling.

23:51Maybe you know more about it than I do, where you're like, well, there's always a next storyteller or whatever. But for me, I hear that and I'm like, that's bonkers. You're writing these books. You're like endlessly creative and you understand your audience. Like what makes a private equity company? It almost seems like a surprise they've gone on to do so well without you, I guess is what I'm trying to say. Well, Workshop had become a machine effectively in many respects. It was vertically integrated and that was by chance. I mean, a reporter said to me, oh, it's amazing that you set up this business, which is cash generative.

24:24You're selling your own products through your own shops, promoted by your own magazine, being able to get the cash in before you have to pay your suppliers. What a brilliant business model. The reason why we opened our own shop is because we couldn't get enough independent shops to stock our stuff. The reason why we published our own magazine, White Dwarf, because we couldn't get enough PR around what we were trying to do. And the reason we started our own miniatures factory was because there wasn't any decent miniatures around at that time. And Workshop grew off on the back of that and then focused more on its own IP, stopped distributing independent products from American publishers, and just focused wholly 100 % on its own IP.

25:09And I guess nobody's indispensable, neither Steve nor I, of course. and if they had now well-oiled machines with all the decisions being made in Nottingham there was no real reason for us to stay on plus Steve and I were preoccupied with fighting fantasy game books and that was still going at an incredible rapid rate and my head had been turned quite a lot by video games and seeing the opportunity there so I think it just made sense for all parties So you have this payout so for the first time you're experiencing what it's like not to be a dreamer living in a van and trying to build a business, but actually a credible businessman with a lot of experience behind you at this point, with deep specialty.

25:55How did the opportunity with Domemark come about? I was approached by the founders, Dominic Wheatley and Mark Straughan. I had number one, two and three in the children's bestsellers list. And they wanted to create for their first game an adventure game, a narrative based game and offer a prize of 25 000 pounds for the first person to solve it so they they came to me knocking on my door at workshop and said would i design or write the story for their their launch products i said yes and we had it programmed in hungary for secrecy so the the the secrets would be kept and some of the clues were in the rule in the rule book some in the game itself.

26:37And ultimately, if you figured it out, you'd end up with a phone number, which if you dialed would leave a recorded message in a solicitor's office on a telephone machine, recording machine. And somebody was presented with the£25 ,000 prize. But it was because my books were numbered one, two, and three that they came to me in the first place. So I wrote the story for Eureka, as it was called, and got on with Dominic and Mark. And when I saw that workshop, they asked me if I had joined them. and invest in the company, which I did. And I suppose actually, you know, depending on when you grew up and probably also your gender and your interests, you know, the different games, the Dome Mark, which became Eidos, actually created, you'll have experienced those phenomenons at different times.

27:21So championship manager, for example, as a boy growing up, as an Arsenal supporter, you know, all my friends love football, you know, championship manager was the game. Everyone played it as far as I was concerned in my world. Then you have something like Tomb Raider come out. And I think the reason for its popularity, obviously, is completely groundbreaking. You guys also created Hitman. You've just talked about, you know, IP in the UK, which I'd love to spend some time on, you know. I was having a talk with the Secret Leaders team just before, you know. Rockstar Games is a great example of this, right?

27:54Up in Scotland, creating the Grand Theft Auto series. You know, I think there's just, there are some really brilliant examples of amazing IP and amazing global successes coming out of the UK. The question is, how good are we at keeping it? How good are we at monetizing it? And I'd love to explore this with you because who better? When I decided to leave Eidos, when it was acquired by Squares of Japan, I became an angel investor and had some very good successes in that space. I was a seed investor in Playdermic that created the global blockbuster mobile game Golf Clash. We sold out to Warner Brothers, who ultimately sold Playdemic to Electronic Arts for$1.3 billion.

28:37There's also a seed investor in Mediatonic that created Fall Guys, again sold out to PE, and PE sold it onto Epic Games for some $700 million. So as a country, we do create incredible content. Now for me, the problem you say is whilst we're brilliant at creating IP, we're not always able to hang on to it for whatever reason and if i said to you grand theft auto tomb raider fable championship manager fall guys golf clash and a host of others the common denominator is they were all created in the uk but they're all owned by foreign companies now some might argue that's great because the result is you get inward investment job security but if the profit is being banked overseas that doesn't do this country the service it deserves and to become effectively a work for higher nation working on content that this country's created but not benefiting from it ultimately is not great so there needs to be more access to capital in this country we've always over delivered with content always been underserved by capital and as i alluded to earlier on the creators have not always been the best at presenting to capital but on the flip side of that capital has not really understood what good looks like in the game space and other creative injuries might I add.

29:59So there needs to be a greater connection between the makers and the money in this space particularly. Thinking about the world today so I guess when you were talking let me take you through my train of thought whilst you were talking I was thinking you know where is a good example of the UK actually holding on a little bit holding its nerve a little bit and maybe you know not in the games market but something like ARM, the chip manufacturer, to an extent, you could argue. And then there's this sort of latest discussion, though, that they're going to list in the USA anyway. And so even in that context, you know, doesn't quite do us the service required.