Frederic Chesnais

Entering the Metaverse with Frédéric Chesnais

For the first episode of 2023, Tim is joined by Frédéric Chesnais, the former CEO of Atari. He is now the Founder and CEO of Crypto Blockchain Industries (CBI), where Frédéric and his team are creating AlphaVerse, a gateway to many metaverses.

In the episode, Tim and Frédéric delve deep into the metaverse, question whether Mark Zuckerberg and Meta are going to stay the course, and discern what Frédéric has learned in the gaming industry that will give him an edge in the metaverse space.

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Tim - 00:00:00: Brett, how are you? And where are you?

Frederick - 00:00:03: Good. I'm well. Thank you. I'm in Dubai.

Tim - 00:00:06: You're in Dubai? How long have you lived there? I was expecting you're going to say Paris, obviously.

Frederick - 00:00:11: No, I've been here for one year. Before that, I was in New York City for 17 years. So New York City is my home.

Tim - 00:00:20: It's your home. And how do you like to buy? Like, is it big difference. I was there, I think, two, three years ago. Found it incredibly hot, spent most of the time inside. Very nice. What brings you there?

Frederick - 00:00:33: No, it's a different perspective because when you wake up, there's nothing really happening because everyone is still sleeping. So I kind of like it not to have to put the alarm clock on. And then things start to really start around 11:00 a.m. 11: 30. So that's pretty cool. Of course, you have to be okay to work a little bit late and take a late. But that's why for me, it's been a lot of problems. It's very different perspective because everything is 6 hours away, right? So you can go to India in 3 hours, Nepal in 4 hours. Very interesting.

Tim - 00:01:10: Very good. So let me ask you a few questions. Obviously you have a very diverse background. And you've spent a lot of years with Atari working there, being a shareholder, being CEO, jumping through different roles. You are now with your own business, with CBI, as I understand you participated or built, likely, I don't know the back story around the Atari NFTs. So I assume that there is a transition period. Question for you to start. What did you learn from being with or Atari for so many years that you would have taken with you to this web3 world? And how are these two worlds really connected?

Frederick - 00:01:54: First, I've been with Atari twice. In fact. Initially I'm a banker, lawyer, CPS, or kind of every sin in the world. And I left the bank. I was working at Lazard. I left the bank in 2000. I joined a video game company called Infogrames. We were a small team running the show. So we bought the Atari brand from Hasbro at the time, and we renamed our company Atari. We sold kind of the company to a big hedge fund. In 2007, the hedge fund became the largest shareholder. That was my first period with Atari. I stayed in the US. I kept doing, you know, what I was doing, which is executive production. So I kept investing in games. I'm responsible for most of the fitness games. Jean Michael, for instance. That was the first fitness game ever, right? With the balance board and the week. And then the hedge fund went bankrupt in late 2012, early 2013. And I was able to buy a toy back. I was alone. And then I ran it from 2013 to 2021. So it was a pretty catastrophic situation. Everything is public domain. The company was listed public company. So you had €1 million of revenue, €30 million of debt, like huge losses. I was able to turn around and I left last year. But maybe we'll come back to it in a second. So back to your question. It seems to me, from what I've done, I'm doing these two stints to say with the brand is that the value of the brand is very important. I mean, of course the value of Toy is important, but any brand you have has its own value. That's the starting point. Because when I came back in 2013, if we didn't if we were not able to do a licensing deal to generate cash, we would have hit the wall. Definitely. I had debt to repay. It was pretty desperate, but we made it. So the value of the brand is important. And the second thing which is even more important is what the brand means, really, because is Victoria a video game brand? Yes, but it was a video game brand. Is it still a video game brand, or is it still a pop culture brand? I'm not sure. For me, it's more pop culture brand today than just a video game brand. So it means that I'm just trying to learning from that. It means that when you do something, when you take over a company, like a toy or any company, you really have to think through the strategy and what the assets are. Because you may look at, again, back to a toy, I could have said, you know what? I'm going to do big games. Like, if you look at Fallout, right, that was taken, bought by Bethesda, and they turn it into a big franchise. But in the gaming space, and me, I said, I don't think that people are waiting for the next Pong, the tennis game. So instead, I focused on TV shows, created DHI hotels. So it's really back to the strategy. What do you have? What are the assets that you have? And it's not obvious. Sometimes it's not obvious what you have. Where's the strength? So that's really what I learn. What can I do and what do I do? Naturally? Cannot change a leopard's dot. It's impossible. So if you wake up and you don't do marketing in the morning, it's better for you to hire somebody who does marketing in the morning. Right? But that's very important. What do you have? What's your strategy? And what are the assets that you have to acquire if you want to move? It's very important.

Tim - 00:05:45: So let me actually step one more back. Why video games for you? I mean, how did you end up in space to start off with?

Frederick - 00:05:52: Like. Why?

Tim - 00:05:52: The Atari brand. What drew you?

Frederick - 00:05:54: There two different questions. Right. But in fact, the video games, because at the time, it was pretty new, and I was an investor at the time, it was very interesting because basically, you could make a game with a limited amount of investment, and you could really hit it big, right? And it's still true in the in the back in the day, you could really invest in a certain amount in the game, and you could make 10, 20, 50 times your money, 100 times your money. I have games, I have invested $500,000. We've made $40 million of revenue. So that's one thing. Second thing is because I'm a lawyer and I'm a banker. So for me, I've already always enjoyed the notion of what's the IP, right? The creation of a story. I'm not Spielberg, but I know where to hire Spielberg and how to negotiate with Spielberg. I'm just making it up.It's true that it's very interesting because you can really create stuff in the video game space, and sky's the limit, right? So that's really why I've always enjoyed video games. I play I mean, full disclosure, I play Candy Crush and I play Fallout Candy Crush. I'm pretty big. I'm above. Very good. So 5000, you don't have a lot of people above that level, but it's interesting because you can create but my role was more the executive producer. What do we want to do? What's the direction? How much money do we need? Are we going to make it? And then after that, hiring the teams. But I cannot program a line of code. It's impossible for me.

Tim - 00:07:41: And from these experiences, I get the connection. And I see how you're looking at this is extremely interesting. So why now Web3? And what made you shift? Is it the same ideas that you can do with very little money, do something and have a big impact? Or what brought you to then set up CBI?

Frederick - 00:08:01: No, first, I've already done three virtual worlds, right? Especially one with Zombie games, survival games. We made a lot of money back in the day. So I left the Toy because we were supposed to split the company into Toy Classics and the Toy Blockchain to make it simple. But then the board changed. That was public. I think the press release went out in 2021. And then the board changed their mind. And I was not the majority shareholder, so I was the main one, but I was not the majority one. Big difference. So I wanted to make another virtual world, world number four, which is why I left. And I created CBI. Initially, I had the territory license. And what we're doing at CBI, it's not only a multiverse, because it's an open world. So first you can join without any crypto, without any wallet. We're not forcing you to have and to buy stuff, but that's our background from the video game space, the free to play games. Then if you want to make a microtransaction, you can definitely do it with a fiat. As long as it is possible. Of course, I'm not going to tell you that you can sell an NFT and get some fiat, but there are things that you can still do with the traditional currencies and I think it's important, especially these days. And then of course, the third option is in this world you can pay in cryptocurrencies and have your NFTs, right? So this is really what we are trying to do, but that's the structure. But what we are really trying to do is I'm really trying to create the entry point and I'm trying to connect as many metaverses as possible. So we have our own Metaverse alpha verse alpha number one in Greek. So this is why it's called alphaverse number one, not as number one in the ranking, but the entry point. And then from this hub you can visit many worlds that we have developed or worlds that are developed by third parties. So we just connect them. And it makes sense from a business standpoint because we can grow much faster. And also the reality is that back in the back of my mind, I didn't want to make a bet on one type of experience or one type of look and feel, because the experience no one knows. Today zombies are hot, tomorrow it's going to be a racing game, the day after music, the day after charity program. So I wanted to have the best of everything and connect. And second, if you have different worlds, it means that you can have also different look and feels, right? So you can have Voxel look and feel gothic, futuristic. Fortunately, the hub we have is very futuristic, but then we have different islands. I'm working on islands for football clubs, right? And of course we're working with clubs. I'm not going to drop any name, but we're working for football clubs. So we are creating a city or district which is very similar to what you can find in that city. So it gives us a lot of diversity.

Tim - 00:11:06: Where do you see, looking at the meta version as a very broad, ambiguous definition of what different people in the industry are working on? Where do you see are the earliest real adoption points and scenarios where you go, hey, the overlap. A, people are joining this virtual space and two, there's a very you know, there's a potential overlap really with blockchain and Web3 technology. What is working today and what is really not working, in your opinion?

Frederick - 00:11:44: I think right now there's a lot of uncertainties, right? Especially as we are talking, right. November 17, you have the FTX implosion a few days ago. You can have some reports because a lot of people, we had no deposit with FTX because as a rule, no, we always keep our coins. But you're going to see the next ten days, a lot of people saying, oh, by the way, I lost this, I love that. I think there's a lot of uncertainties today and I think it was also a lot of BS because people thought that let's do some tokens and then we'll see what comes next. So I think the experience is really very important and of course, everything that's digital is going to be very successful in my mind. So that right now, apart from the Hub, which is our main place, I think we are working on four experiences. One, we have four priorities. One is poker. It's going to be announced pretty soon. Second one is football. So we are creating virtual districts for the clubs who are recreating the stadiums. If you own a seat in the virtual stadium, you can upload your photo because you're a fan. We are reffling, so we're gamifying also the game. We are selling the different parcels of the field and if there's a freaking from your parcel, you get a prize and things like that. So I think it's all about the content, right? So football is the second one. The third one is fitness, because I know fitness quite well and I think in the Metaverse, what you can really do with the fitness is you recruit people in the network to give them tokens. And what can you do with the tokens? In fact, the tokens give you access to exclusive offers. So it's basically putting on the blockchain any loyalty program so that I believe a lot in it, instead of having to wait three days and three nights in a row just to get the next bag of supreme. If I am sure that because of the tokens I have, I am ranking number three in the line, I don't need to spend three days, I just show up on the time that day. It's me, because I have the tokens. So I think you're going to see a lot of loyalty programs coming up on the blockchain. At least I believe in it and we're working on this. As long as you have a great offer to put on the table. Right. It's all about the experience. And then finally, of course, it's video games, because video games, this is bread and butter. You're going to see you've seen like the play to wear and things, but you're going to see a lot of new games coming. For instance, were working on the rollercoaster game. Roller Coaster Tycoon was the executive producer for many years. So this is not the Roller Coaster Tycoon game because this is not our brand. But we are working on the Metacoster game and you're going to see a lot of play to earn games like this. But I believe in now, having said that, yes, there were some excess, some bad situations. We don't do a lot of defi over banker just because it's too risky. I think you don't know where the line is between security not secure. Are you a banker? Not a banker. So from the moment we're not touching.

Tim - 00:15:19: That, I got a question for you. And I've been fascinated with the internet for as long as I can remember I've worked in It. I had this genie out of the bottle experience with Ethereum and Smart Contracts in 2018. But since this entire meta verse thing started, which for me was initially I thought somebody's just coming up with Second Life and trying the same thing again and then seeing Facebook with Meta following down the path. I've been looking at this. Do you remember this is likely from your generation. Do you remember what the stereograms are? You know what a stereogram is? Like this, pictures with a lot of dots on it and then you stare and then suddenly you see a dinosaur in 3D, right? Yeah. So the Metaverse for me was in many ways like this kind of picture. And I was looking at it and I just couldn't see the dinosaur. Okay? And two things have happened with me over the last few months or so, really, is that I somehow, first of all, thought back that when I was not even a teenager, I remember playing computer games, right? I had a Commodore 64, I had an Atari. I had this idea of programming computer games. Sounded like a great idea. My mom would tell me it's a total waste of time because, you know, computer games is something for boys in the age of six to twelve, okay? And that would be the market, which is obviously from that perspective, totally, you know, looking backwards and we know the size of the industry very wrong, but it's the perspective of an adult into this gaming and virtual world in some sense, okay? And I see all of us, including myself, and what you're talking about, talking about the metaverse and all this. Let me put like this one. I hear Mark Zuckerberg talking about virtual meeting rooms and the metaverse , okay? Then what happens is I turn left, literally have my kids sitting here. They're doing the remote schooling. I came to realize, evidently my kids are already in the metaverse . And if I would let them, they would be there all day because they are playing Roblox and Minecraft and they are totally submerged. And the idea of selling them the virtual meeting room is something likely they will never experience in their life because they will never go to a meeting room, they have never been in a meeting room, they will never be there. And it seems to me in many ways and sorry for this long explanation, that we are somewhat now in this space where we're creating the metaverse for an audience that might never really adopt it because it's alien to them. As much as my mum wasn't connected to the computer games at this time, while the next generation or two generations down, my kids are nine and ten, they are already in it, and you just need to extend on it. And I have all sorts of concerns about proprietary technology and Microsoft and Song and I have a different vision of it but there seems to be like a huge disconnect, like projects about virtual meeting rooms on one side that nobody is using and where the stock of companies like plummets to the ground. And on the other side, there's an entire generation already living in that metaverse. How do you make sense of that?

Frederick - 00:18:54: I make a big difference between first, I tried to make sense of it, but when it's very complex, I try to oversimplify. For me, you have two different things. On the one end, everything that's virtual online. I've gone to a meeting room, this chat, this is online, this is offline, but it is just there is no sense of ownership. We're using this tool, we're playing Roblox doesn't really matter. To me, that's a virtual world. For me, the Metaverse is when you start owning a piece of that world and that it's yours in the sense that you can resell it to anyone, no one is going to bother you. You really own it. There is only one. You can count how many pieces there are. It's not only land. I'm going to give you a few examples in a second. And the big difference is, if I create an asset in court of duty in many of these traditional video games, it's very complex to sell these assets. There's money, but it's complex. I have to go through the publisher if I'm on mobile, then go through Apple or Google and then the bank and blah, blah, blah, blah, blah. So for me, the Metaverse is really the blockchain layer, which is on top of the virtual world. Sometimes you don't need it and sometimes you need it. So to give you a sense of where I really think the Metaverse is going to take place, back to my football clubs, we are recreating these stadiums, we are setting these virtual seats. They are NFTs. There's only one seat. It's yours. When you own it, you can win prizes, you can upload your photo. When you own it, you have real world advantages into the real world. So you can go here, there, you can visit the training facility and things like this. But then the most important thing is reuse and you can resell it and no one can block you from doing this. And this is where you're going to see a lot of new things coming in the Metaverse. Because for me, the Metaverse is the sense of ownership. And it's ownership, transparency, accountability, everything that links to the blockchain. The mistake which is being made by a lot of people is that they think that because it's a virtual world, it's called a metaverse. Second Life has been here, what, since 2004? Five whatever. So the big difference is the blockchain. And for me, this is where I draw the line and this is where I think that there's going to be a lot of new application because the ownership will today, the ownership is in real life. And then let's say if you're on the painting, or let's say if you're on the true photo, then you can make the copies on the internet. It's going to be the reverse. The most important thing will be once the photo in the digital world, there are eight copies, only eight copies. And after that the printing is just like an expectation. But the ownership of the photo would be on the blockchain and the one who owns the virtual photo as the real value. Because this is what you're going to be able to track. Another thing which that one is not for today. Just to give you another example, music, we know today that there is a huge black box, which is spotifying if you know the music business a little bit, you know what I mean? So I think that I will not be surprised down the road. I am sure that one day there's going to be a system tracking songs that are played with an almost immediate payment on the blockchain of the royalties to basically all the rights order on that song. That's it. And just this on the music. On the music is huge, but everything, every time, you're going to have a lot of intellectual property rights that you can trace back to the music. The metaverse  is not necessarily in the 3D. This is another mistake which is made. It can be a 2D one you're going to see, for instance, visa application in the music world and this is going to basically revolutionize the the music industry, I am sure.

Tim - 00:23:10: I'm very intrigued about this and I have to say, for me, this is new and I very like this how you're looking at it. So what you're saying is really you should or people should or you are separating the concept of Metaverse from virtual world, meaning the metaverse as a separate digital layer that defines things like block and layership.

Frederick - 00:23:37: You have the virtual world and you have the blocks and layer. The combo is the metaverse , but the blockchain layer makes the difference. Because I can play, for instance, let me give you another example. I can play a rollercoaster game on PC, okay? It's an online world. It can be multiplayer, right? We have created the world which is 140,000 pieces of land. You own the land, right? And you can sell it to somebody else. And all the revenue you’re generating every day is allocated among the different players. But you own the land. No one can take it back from you and you can resell it to somebody. The owner of the game is just going to take 5%. But you own the land. And if money is generated, it's going to be allocated to your land. You own the land.

Tim - 00:24:30: So going back to your example with football and the seats, I do see very clearly and evidently the value of an NFT that represents a seat that gives you access and privileges online in the digital world and offline and waking up prizes and all sorts of things associated to it. I totally get that part. What is still open to me there is what is the relationship between that digital seat and the ownership of the digital seat and the virtual world, if there is any. Is there anything associated when you say, hey, there's going to be the stadium? Because I see what to do with the NFT. I'm not seeing what I would do in a virtual stadium. And I'm back at staring at the stereogram and going…

Frederick - 00:25:20: What's your favorite team? Okay, if tomorrow I recreate the stadium for Bremen, right? If I say, guys, the stadium is what? I'm guessing 30,000 seats, something like that capacity is 42. If I recreate the stadium, will you buy if I say there's only one seat? So if 42,000 seats, we have no other stadium. Do you want to buy the seat? If you buy the seat, you can upload your photo so you can show your pride. You can show that you support your club. If you buy the seat, you can have a message on the wall of supporters. If you buy the seat, you're going to be participating exclusive, right, to participate in some rifles that no one else can have. If you buy the seat in the real world, you're going to also be offered some tours of the training and facility, the academy. And if you own the seat, not only I cannot take it back from you, so you own it in real life, in perpetuity, but also you can resell it to anybody you want. I cannot take it back from you. And you're guaranteed that there's only one seat, and this is yours. You are 42,000. So it's basically a club of 42,000 people. So that's the experience of the blockchain, the difference between the blockchain and the game. I can have the same experience, but in that case, I can always take your seat back. I cannot guarantee you that there are only 42,000 because you cannot verify that I only have 42,000 seats. I can bullshit you, and I can have more seats, right? If you want to sell it, I can block you from selling the seat. I can say, you know what you have to say to me, I'm going to blah, blah, blah, blah, so you're going to lose a lot of stuff. So that's a huge difference between having a video game in a video game and a stadium in the middle of the blockchain layer is making all the difference.

Tim - 00:27:17: I agree, but do you also see, associated to that experience a virtual world? Like, is there going to be a virtual, visually 3D stadium associated to it? Or are you seeing in this example, specifically, the metaverse? I get the benefits, and I think that's very clear. I'm just wondering, and maybe that's where a lot of confusion comes in for a lot of people is when people say stadium in the midavers, the first thing you think is some 3D stadium that you walk in and then you have a seat and then you sit on that seat. Is that something that is even on your mind? Do you see any value in that? Or is this for you? Something like, hey, it's totally irrelevant. What should people do in a virtual 3D stadium?

Frederick - 00:28:00: I think it's very relevant. So look at my screen. Don't drop the name of the club. But this is what you're looking at is a 3D district. When you look at this, you know where you are, you know in which city you are, right, it's obvious. And then in this world, you can have the official house for the club, where you can stream your content. You can have the official houses for the clubs of supporters and you can have everyone buying a flat. And if you're on the flat, you have access to the VIP district in this world, right? So you have the VIP section in the house, so you have VIP content. That's not necessarily you have to pay. Just let you know 30 minutes before what the lineup is for the team. And I think it's pretty interesting. And then you can enter the stadium. You see the guy is going to enter the stadium. And here you can buy a tile, just like you can buy a bench in New York City. You can buy a tile, put your name, you can buy a seat in the virtual stadium. You can put your photos. As I've said, you can then participate in real life experience and have real life perks. So that's really, I think, the junction between the Metaverse and the real world. But here you need the blockchain to guarantee that you have that number of seats and no one can basically take it back from you and you can sell it to anyone you want. Yeah, that's the type of thing we are working on. This is going to be announced pretty soon.

Tim - 00:29:36: Frederick that's very cool. So what do you think Zuckerberg and Meta are going to do? Are they going to stay the course? They're going to go off the course, they going to eventually change, they're going to succeed? What's your opinion, especially you coming really from a business perspective with a background as a lawyer and how you expressed it in the beginning like this, where I want to go, these are the assets I need and how do I make this happen? Where do you see Zuckerberg and Meta today and where do you see it tomorrow? And this is not investment advice.

Frederick - 00:30:12: I may own a few shares of Meta for disclosure, but I think first we have the teams, we have the talent, they have the money, and they have the audience and they have the experience. So they are not going to go away. I think that there were a lot of stuff they allocated, for instance, to metaph expenses that were maybe not relevant for the Metaverse. So I think I don't see them changing course because it's a virtual world. You're going to see a lot of people working online in the future. You're going to see today you have 4 billion people that do not have access to the Internet, right, basically out of the population. And this is going to change in the next five years. When you look at all the satellite systems that are coming up, they will have access to the Internet. So it means that the number of people that have access to the Internet is going to double in the next three to five years. So they're not going to go away. And I think they are here for the long course and the long run. So that's my first thing. Second thing, I think, because it's such a big company, it is such a giant that they still need to define what they want to offer in their virtual world slash metaverse. And it's true that instead of pushing again, seen from my little perspective, because he has created a giant. I have just run a charity, sold it, bought it twice and sold it twice. But I don't think that put enough emphasis on the blocks and side of things. You see where I'm going, I split the world. I think we've put too much emphasis on trying to find the justification for the Oculus quest device. All right? And I think instead of looking at the world, the metaverse from a user experience and blockchain perspective, they said, no, it has to be with the goggles, just like in Ready Player One. And it's basically their experience is driven by the goggles and less by the blockchain. And I think that that's the issue for me. So they've done a lot of things right, they have a lot of resources. Once they figure out that, you know, maybe alcurus is not the metaphor because after ten minutes, frankly, maybe that's my age, but after ten minutes, you're like, give me a break. You really need to breathe, right? It's very difficult to have a 1 hour experience with the archives. I was told that the pro two that got released is better, but I think we have to basically differentiate the Metaverse from Oculus. Oculus quest is not the Metaverse. Archery squad is not on the blockchain. Oculus quest is virtual reality. Full stop. This is not the Metaverse. This is not the blockchain. The blockchain is something different. And I think for me, the way I see it and maybe I don't understand the longer term strategy, maybe there are things that PCs that I'm missing, but what I'm seeing is that they are trying to push to all the Oculus quest and they are forgetting that the Metaverse is about the blockchain but not about the virtual reality. Is not the blockchain. So that's the mistake I think they've made. And people are like, oh, that's great, the middle of us. And no, it's just virtual reality. It's not the middle of us. That's it. But we are here for the long term. We are going to say this is just like a heat. It's just a bump in the road. They are here for the very, very long term. I bet a symbolic daughter that they would come back with libra, whatever they want to call it. They're going to have their virtual currency. They're going to do it right. They frightened. They spooked everybody, every bank, every central bank when they announced it. But when you have, what, a billion people with Instagram, with everything, they're going to stay on the blockchain. They're going to have their token. They're going to have their virtual currency. It's just like this is a long run. This is not a hit and run project. And I am sure they're going to stay because we have the expertise, the strength, the vision and the money. We have competitors, though, can tell you. Google is going to be going to be one. Apple as well. Microsoft as well. That's it. Hopefully CBI and Alphabet will also be.

Tim - 00:34:45: There you go, Frederick. This was a very interesting, very insightful conversation. I learned a lot from it, I'm sure. Pass it on. Thank you so much for your time.

Frederick - 00:34:58: Okay, great. Thank you so much, Mr. Paul. Thank you.

About the Show

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Graham Spencer

How people share their availability and generate stronger commitments via token staking

Spencer is a product manager for DAOhaus, and a RaidGuild contributor. During his Web3 travels, he's noticed that there are usually 2 kinds of people in DAOs - those that dip their finger in multiple projects, and those who focus on one project only. Now, he's championing incentive based mechanisms that make people share their availability and generate stronger commitments via token staking. That, and he thinks that DAOs can be an answer to climate change.