Former Nexon CEO Owen Mahoney published a blog post on Tuesday analyzing the video game industry’s hype cycles—esports, cloud gaming, the metaverse, virtual reality, and the like. He warned readers against falling into these cycles, providing a framework for both industry patterns and what he calls “fad audits.” This sort of transparency is unusual for an executive, something Mahoney himself alluded to in the post itself, referencing an exchange with a Bloomberg reporter in 2015, in which he was advised not to speak freely about his opinion on virtual reality.
“It is easy to look back and ridicule everyone involved,” Mahoney, who left Nexon in 2024, wrote. “But the phenomenon of game industry hype cycles is actually serious business. The fallout from these mass delusions has been tens of billions of capital destroyed and thousands — possibly tens of thousands — of careers upended. The degree of destruction leaves an important lesson: a vital skill is to identify and understand hype cycles, and to filter and orient yourself when they inevitably arise.”
And, Mahoney said, mocking the people who drove these fads is “valuable,” taking the rare step of validating the external criticism that these sorts of decisions often get. “Mocking fashion trends and the people who participate in them after the fact is fun, but it’s also valuable,” he wrote. “These weren’t harmless fads. The malinvestments destroyed billions of dollars of capital that belonged to pension funds, retirement accounts, and ordinary savers. For those making capital investments, ignoring user experience questions isn’t just naïve, it’s a breach of fiduciary duty.”
Instead of chasing fads, these companies and executives could have built “things people actually want,” but instead ended up wasting “the time and attention of talented developers and technologists.”
The game industry’s failed fads have followed four trends
Mahoney described the pattern that industry often follows within these sorts of hype cycles: the “glamour shot,” which presents a picture perfect vision of a product; “fake news,” the “grand narrative” of the new piece of technology and how it’ll revolutionize life; the “OK Boomer phase,” in which “consultants publish glossy reports with hockey-stick charts;” and, finally, the “M&A validation,” when a company makes an expensive move that legitimizes the hype.
Mahoney used former Activision Blizzard CEO Bobby Kotick’s big push to sell esports to traditional sports owners as a concrete example of this pattern. “He needed revenue; they needed growth. Team owners saw their kids gaming and assumed, ‘In the future, kids will fill esports arenas the way we filled football stadiums.’ Both sides had every incentive to believe the hype, although only the seller made money.”
Next, he presents what he’s called the “fad audit,” which is three questions to ask about a potential fad. He urged executives to question whether a trend is actually something new and improves user experience. The third question is about a product’s tangibility: Can you try it out yourself? “Your own senses are usually more reliable than the crowd’s opinion,” Mahoney wrote.
Mahoney pointed out that if you analyze several of the industry’s biggest fads through this lens—including virtual reality, blockchain, the metaverse, esports, and cloud streaming—none of them pass muster
“Discerning the real from the hollow is more important than ever, at the start of the largest hype cycle — and world-changing technological revolution — of our lifetimes,” Mahoney concluded. “That’s the challenge of this moment, and the subject of a future essay.”
