Fred Chesnais interview: On blockchain bets, Atari hotels, and shipping the VCS console

Under CEO Fred Chesnais, Atari is a company with just 28 employees. That’s pretty small for the oldest brand in video games. But during the pandemic, Atari’s small size helped it operate with a lot fewer risks than other companies.

Chesnais bought Atari out of bankruptcy in 2013, when the company’s revenues had sunk to just $1.2 million and the company carried a debt of $34 million. For the year ended March 31, 2020, Atari reported a profit of $2.4 million on revenue of $29.4 million. Much of that revival comes from the success of the Rollercoaster Tycoon brand on multiple game platforms. That license will expire in a couple of years, but Atari has made the most of it in generating revenues that have helped the company with its comeback.

Now the New York company is working with a variety of partners who can leverage the Atari brand, including hotel companies and blockchain-based fashion companies that are issuing Atari-branded virtual clothing. Atari has also begun shipping its long-awaited VCS consoles, which it originally announced back in 2017. That project ran into a number of hurdles along the way.

I spoke with Chesnais about the company’s progress during 2020, and he said one of the biggest achievements was keeping the company’s employees safe.

Atari recently announced its partners have created an Atari-inspired fashion line that uses digital non-fungible tokens, a kind of blockchain tech that can uniquely identify items such as pieces of clothing, using Enjin’s suite of blockchain tools. (Blockchain is a transparent and secure decentralized ledger.)

Fabricant and Atari have now launched the Atari NFT fashion line. The first blockchain-based digital fashion items include a robe, a sports-like glove, and a headpiece. They can be used in upcoming games with digital avatars. During the year, Chesnais also licensed a hotel chain to create Atari-themed hotels. And the company also partnered with Animoca to create an Atari-themed land inside the virtual world of The Sandbox. And Chesnais said there are some more games in the works.

Here’s an edited transcript of our interview.

GamesBeat: What have you been up to?

Fred Chesnais: We’re launching our partnership with Enjin. We started with WAX, and WAX is interesting in the sense that they have a huge audience. We made our first sale there. Those NFTs (non-fungible tokens), I would say, are static. You buy them and own them, but there’s not much you can do except resell them. With Enjin it’s a slightly different type of NFT. We’re trying to embed more functionality, like wearing a T-shirt online. You can take the NFT and edit your photos to show it off on yourself. You don’t have to buy the goods. That’s the second type. Only some of these NFTs will be available against Atari tokens. They’re pretty cool.

Moving on to the third type of NFTs, because each partner has certain strengths, we’re working with Animoca. We have a big license with them. They have the right to use 17 of our games on the blockchain. The first use case out there is The Sandbox, if you’ve followed that. Atari is the second largest landowner in The Sandbox, this virtual world on the blockchain. We’re releasing assets and NFTs with The Sandbox, and so far it’s done quite well. Atari is pushing to have more assets and more games, like Rollercoaster assets in The Sandbox.

NFTs, I believe, are just the beginning of games on the blockchain. We have our own casino being tested as we speak. Our wallet has been submitted to iOS and Android. I believe that static NFTs — as a gamer, I want more. You see what we’re trying to achieve: NFTs that you can use outside, on social media and everywhere else. It’s an interesting evolution. But the best evolution will be card games. That’s the next step for me.

GamesBeat: How did you decide to embrace the broader NFT space, cryptocurrency space, or blockchain space? Some companies stayed away from it early on because they were worried about scams, related to cryptocurrency in particular. There’s another set of game companies that don’t want to have anything that can be taken outside of a game. You couldn’t cash out rewards from a game through something like NFTs or crypto. How did you decide that Atari can fit inside some of these very innovative structures while other, more conservative game companies are still waiting?

Chesnais: The whole point is to have games on the blockchain. It’s fun. They’re different types of experiences. And it’s secure, because it’s on the blockchain. You know exactly what’s going on. Adding or not adding cryptocurrency is a decision we took because — as far as we know, it’s not a scam, because it’s us. I’m not afraid. But you can be on the blockchain without your own currency. It doesn’t matter. You can take it up that way if you’re afraid of scams.

The NFT is the game. You can sell a game. You can sell an NFT. The fact that the NFT is taken outside of the game — the NFT is the game. If you’re selling the game, you’re selling the NFTs. Just like you’re selling virtual currency in a game, you’re selling NFTs, because that’s the currency of the game. You’ll see more and more card battle games where you sell the cards, sell packs of cards. You’re not taking those assets outside of the game. You’re just selling the cards so people can play the game.

GamesBeat: For you, then, are the NFTs like a kind of CryptoKitties model?

Chesnais: Not necessarily. You have NFTs that are very static, like a piece of art. You see art items being auctioned off on the blockchain. This is static. Then you have things that are a bit less static. You buy the NFT and you can do some things with it. You’ll see that next week. I can buy a car, a Ferrari, on the internet and edit it into a picture where it’s in front of my house.

GamesBeat: Maybe it’s good to define it a bit more, then. If I think of what you just described there, what comes to mind for me is that the NFT, for you, is more like a collectible. Is that right?

Chesnais: By definition they’re collectible, yes, because they’re limited in quantity.

GamesBeat: From there, what’s the game element?

Chesnais: The first part of the game is just collecting and ownership. Think of it like baseball cards. You buy the cards and trade them and build a collection. The next step is these more interactive NFTs. You buy that Ferrari, a limited edition, and you can show it off in your photos. And then you can have card games. Look at what Animoca is doing with their Formula One racing game. It’s like a management game, Football Manager, except that the number of players you can have is limited. Therefore they have value.

If you create a card game, you can have a limited number of cards. Players can keep or resell those cards, or even craft another type of card. You see what people do with things like Hearthstone. The NFTs are cards you can use in the game. And you have other types of games on the blockchain. Back to the Formula One game, you can buy and sell parts to build the best car you can to win races.

GamesBeat: There are the NFTs, then, that could be used for some other kind of gameplay.

Chesnais: Right. The NFTs are the essential parts of the game. Something like cards can be limited in number. You have better security. You know exactly where the cards are. You can buy and resell them one-on-one. But the developer will still be making money by selling them at their origin.

GamesBeat: And that’s still a part of the market that you want to play in?

Chesnais: Oh, yes. We’re working on a skill-based mobile game on the blockchain, where the winner will take 90 and we’ll keep 10.

GamesBeat: It seems like you’re embracing the whole of blockchain’s potential, and not just focusing on one part of it.

Chesnais: Yes, because no one knows what’s going to work. It’s a good space, a growing space. We’re doing a lot of tests. Having our own token is interesting, because it gives us more leverage. We can sponsor some games. To your point, there’s always a fine line between the different conditions. But the point is it’s skill-based. There’s no luck. There’s a difference between a skill-based game and a luck-based game. If a monkey can win — that’s basically the test I apply. A monkey can win more money than a human at a slot machine.

GamesBeat: If you look at the whole blockchain space and the different partnerships, is this a big investment for you, or a big investment for the partners?

Chesnais: We’re humble. We’ll team up with people who we believe can bring something. Money-wise — right now everyone in the space is trying. We’re basically throwing darts. But what people like about the blockchain, they understand the rules. They feel that no one can cheat. You can trace the results. If you have a certain number of cards, you know no one can print any more than what you’ve been told. And there’s a bit of bragging rights to it, right? Getting in and playing on the blockchain at the beginning.

Casinos on the blockchain are pretty cool. You’re sure that the machine delivers you the published results. It pays right away every time. You can cash out. No one is going to tell you, “No, you can’t make a withdrawal.” And we’re just at the beginning.

GamesBeat: If you consider blockchain to be in an experimental phase, what would you say are your biggest bets, the mainstream parts of your business? What’s going to be big for you in 2021?

Chesnais: Games, VCS, and licensing.

GamesBeat: What’s the latest on VCS?

Chesnais: They’ve started to ship the machines. The first consumers have received their machines.

GamesBeat: Do you have a goal for getting it to all the Indiegogo backers? Do you know when you’ll be able to expand distribution?

Chesnais: We want to keep adding distribution channels in the U.S. and Australia. In Australia we’re done already. It’s just a question of delivering more units. Europe will come in the second stage. But the point is we have the machines, and we’ll keep adding more.

GamesBeat: Are you still optimistic about that as a business?

Chesnais: People understand that it’s a powerful mini-computer. The economics are good. It’s very modular and flexible. We’ll have different retail prices in different locations. You can look at our website. We’re doing some promotions and different packages for things like the controller and the joystick. There’s going to be one machine with 8 gigabytes of memory. When you look at the value of the different pieces, it’s a fairly cheap mini-computer.

GamesBeat: Do you have any big game releases on your list for 2021?

Chesnais: We’re working on Atari Combat. We’re working on Mob Empire. We’re working on a couple of initiatives outside of Rollercoaster Tycoon. And for Rollercoaster Tycoon, Facebook just announced their new platform, and RCT Touch is part of that platform. It’s a bit early to say whether it’s working or not, but I find it very encouraging for our business. Is Facebook trying to go against Apple and Android? Maybe. We’ll see.

The other big element of the business is the brand licensing and merchandising. We have new categories of products that have been established over the last few years. All these home arcade machines, you couldn’t find them for less than $2,500 before. You’d have to go to arcade auctions. But now you can have them for your home, and they’re retailing for more like $400 or $500. It’s amazing, the number of units that are being sold.

We’ve collected $1 million just through the Atari Hotels this year, the year ending March. We created the concept and everyone got it, a hotel with games inside. We’ve sold rights into eight markets in the United States, with more countries coming.

GamesBeat: How soon do you think you’ll have a hotel up and running through your partners?

Chesnais: We had an announcement about two months ago. They set a date in 2022, I believe. It’s a very nice design. The architecture firm, Gensler, is one of the best in the U.S. What’s interesting about the hotels is that the new concept — not only Atari, but any new hotel being built today will take into account the lessons of the pandemic. We’re not at a bad moment for coming up with new concepts, whether it’s Atari or not Atari.

GamesBeat: What would you say was your biggest success in 2020?

Chesnais: We adapted to the pandemic. For many companies it was a threatening event. We kept our employees safe, which was the biggest thing. We were able to adapt the organization so everyone could stay safe. We were lucky to be in a business that was primed for this new form of organizing for work. We’ve been able to keep our employees safe and keep the work going. No one got infected. We were able to turn around the organization and make sure no one would take unnecessary or excessive risks. To me that’s our biggest achievement. Compared to that, games being launched or delays doesn’t matter.

The big difference between 2020 and 2008 or 2009, in those earlier years, everyone went down for a while, but 99% came back up from an economic standpoint. This time it’s so different. A lot of companies went down. The video game business jumped up. Zoom went up. Everything online went up. But the ones who went down — some may come back, but a lot of them are not coming back. It’s going to take a long time for things like retail or office real estate to recover. We’re seeing a change in structure, in the way we organize ourselves as a society. It’s a deep, deep change.

GamesBeat: What do you enjoy about your job now?

Chesnais: I enjoy the brand. I enjoy trying to grow the company and coming up with new concepts. Delivering the VCS was super important. Building the concept of the hotels is super important as well, because that could stay with us for a long time. I still enjoy being able to innovate. Looking into the blockchain has been very interesting, because I see potential there. It’s a mix of creation and evolution and technology. We can bring some good experiences to players.

GamesBeat: How many employees are there at Atari now?

Chesnais: I think it’s 28. We’re still very small. It’s one of the lessons of 2020. It could have been a very difficult situation if we were managing a big studio. Decentralization is key. But it works well up to a certain size. After a certain point, if we wanted to be more relevant, we would have to bring in more employees. But I’m more interested in the top line and the bottom line. If the size of the company doesn’t make sense, we’ll change that. Our work on blockchain has brought in some more employees, but they’re part of those joint ventures with our partners, so I don’t count them. That might add between 30 and 40.