In a drab strip mall in north Seattle, nestled between a hair salon and a State Farm outlet, Mike Krahulik and Jerry Holkins are working on an idea for the next installment of Penny Arcade, their hugely popular webcomic. Their nine-room office is a gamer's paradise — Willy Wonka's long-lost chip fab. There are dozens of Xbox 360s, a heaping carton full of Nintendo Wiimotes, an SNK arcade cabinet, a vintage Atari Lynx handheld. The walls are covered with blowups of their work and game posters autographed by the developers. There's also a floor-to-ceiling stack of the latest videogames, sent by publishers eager to be mentioned in the strip. "We'll throw them on sometimes when we're looking for grist for the day's comic," Holkins says. Krahulik wrinkles his nose. "Grist for the day's comic? Grist?!" "Yes, grist," Holkins says loftily. "Look it up. It's a word." This article has been reproduced in a new format and may be missing content or contain faulty links. Contact wiredlabs@wired.com to report an issue. Krahulik shakes his head in disgust. "You're a douche. That's a douche word. Why don't you just say ‘raw material' or something?" It's a fairly typical conversation for the webcomic superstars. When they aren't trying to crack each other up, they're ridiculing each other. Krahulik mocks Holkins' pretensions; Holkins mocks Krahulik's ignorance. This friendly antagonism fuels their strip, which stars two slightly fictionalized versions of themselves. Holkins, 31, and Krahulik, 29, have cranked out three strips every week for the past eight years. They check the latest headlines on game sites, scrutinize the latest screenshots and gameplay footage released by publishers, gab about what they've been playing, and try to settle on a topic by lunchtime. Holkins types up the dialog and narration while Krahulik sketches something on paper, scans it into his PC, and uses a Wacom tablet and Photoshop to draw the final version. Even with frequent breaks to goof off, they're finished by five in the afternoon. Then the comic is uploaded to their 10-server collocation facility in San Jose. Within 24 hours, it will get a quarter of a million hits. For more, visit wired.com/video Penny Arcade Adventures Penny Arcade may be invisible to the vast majority of Americans, but it has enormous reach and influence among people who care about games — the developers who create them, the publishers who sell them, the retail wage slaves who put them on store shelves, and the gamers who buy them. The dialog is cited like the Talmud in online debates, and the bizarre words it has coined are part of gamers' everyday speech — like bullshot, a gorgeous screengrab of a game that gives a false impression of its graphics. Krahulik and Holkins make a comfortable living from the strip, what with 55 million monthly pageviews driving online advertising and merchandising. They have a full-time staff of 10. They oversee a charity that has given $2.2 million worth of toys and games to children's hospitals since 2003. And in late August, their annual convention — the Penny Arcade Expo — will attract 30,000 visitors, making it the largest game conference in the US. This is the story of how two douches from Spokane, Washington, became the most powerful players in the videogame industry. "The term geek has acquired a patina," says Holkins, a writer prone to ornate verbiage and renowned for his witty blog posts that accompany each strip. He's right — the word is being reclaimed as a badge of pride. But the creators of Penny Arcade aren't among these geek-come-latelies. They're unreconstructed geeks of the old-school variety — which is to say, of the high school variety. Krahulik has glasses, a beanpole physique, and a touch of overbite that gives him a pained expression. Holkins, who also wears glasses, is balding and so pale that he looks like he could get moonburns. Growing up, they were the prototypical misfits, ostracized by the cool kids at school. Holkins claims that he owes his success to those formative encounters with jocks and their lacrosse sticks. "I've been repaid a thousand times over for the damage they inflicted," he says cheerfully. Krahulik agrees. "One time in high school, someone broke into my locker and stole my stuff, so I had to wear gym clothes for the rest of the day," he says, wincing at the memory. "I developed humor as a defense mechanism. Now I drive a fucking Mercedes." The two met 14 years ago in a journalism class at Mead High School in Spokane. Holkins, a senior and a staff writer on the school paper, noticed Krahulik's portfolio and wanted to team up with the aspiring cartoonist. After graduation, they spent their free time making what Krahulik calls "overwrought superhero comics" and playing videogames — lots and lots of videogames. While they waited for their creations, like Chickenman and Clan Walrus, to set the world on fire, Krahulik stocked shelves in the electronics section of Toys "R" Us and Circuit City.

Holkins found a slightly more lucrative gig doing tech support for the local school district. The two took an apartment together in 1997, and Holkins paid a bigger share of the rent, subsidizing his friend so he'd always have a gaming partner. He also nurtured a vague sense that they were destined for greatness as a creative unit. "I was very sure that one of the things we were working on would hit," he says. Combining their passion for games with their skills as writer and artist never occurred to them until one day in the fall of 1998, when a now-defunct enthusiast magazine put out a call for game-themed comic strips. Their submissions were rejected, but a Web site targeted at gamers agreed to run the strips — and then asked for more. By putting themselves in the comic, they tapped into the classic buddy-comedy formula: Holkins is the left-brained PC gamer, Krahulik the right-brained console gamer. Holkins' alter ego, Tycho, named after the 16th-century astronomer Tycho Brahe, is an imperious egotist who loves to scrutinize the story and structure of a game. Krahulik's character, Gabe, is an oblivious jerk who adores cool graphics, explosions, and gloating over victories. They're perfect complements — Abbott and Costello or Mario and Luigi. For six months, Holkins and Krahulik wrote their comic gratis. They had no idea how popular Penny Arcade had become until they moved to their own site in 1999. It turned out they were getting a million pageviews a month. When that number quadrupled the following year, they quit their day jobs. The site now averages 55 million pageviews a month — more, for example, than Gizmodo. The Penny Arcade format is familiar — usually a traditional three-panel strip culminating in a gag, like Dilbert or Garfield. But Penny Arcade will never be syndicated in newspapers; the humor is incomprehensible to normals, full of references to load times, character classes, and experience points. It mercilessly lampoons individuals most people have never heard of: Take that, vice president of online commerce at Electronic Arts! And that, CEO of GameStop! It's also joyously and unapologetically filthy, shot through with the sort of scatological epithets that gamers heap on one another in the heat of battle. It's not like Holkins and Krahulik have any interest in getting into newsprint anyway. They've become media titans and taste makers on their own terms. Within their subculture, the Penny Arcade guys are like Roger Ebert, Richard Pryor, Thomas Nast, and Edward R. Murrow all rolled into one. Fans memorize punch lines and wear Penny Arcade T-shirts. References to the comic pop up in games. "The Penny Arcade guys represent the true voice of the dedicated gamer," says Warren Spector, creator of the Deus Ex series of games. "From the start, it was so apparent that they were just a couple of game grognards like the rest of us." One of Penny Arcade's biggest attractions is that it dares to be dismissive. Most of the enthusiast press is loath to offend the publishers who provide advertising and access to their content. But if Holkins and Krahulik think the lightcycle mode in Tron 2.0 is shit, they say so, and they use the word shit. (They also stress that they don't mean it's "the shit.") Teen fans love the strip for serving up such flame-war ammo. Then there's the willingness to wade into the technical, political, and cultural issues surrounding games. This earns Penny Arcade plaudits from eggheads: After participating in an epic online discussion about real-money transactions in virtual worlds, game scholar Julian Dibbell linked to one of Holkins and Krahulik's strips and wrote, "It is humbling almost to the point of despair to discover that 15 dozen screenfuls of ponderous commentary produced by a small liberal-arts faculty's worth of beardy gamer geeks can, with almost zero loss of insight, be reduced to the three panels of a Penny Arcade cartoon." Back at the office, everyone is playing Ping-Pong. Not Pong, mind you, but actual meatspace Ping-Pong. Krahulik is working up a sweat trying to return vicious serves from Robert Khoo. "Having our own Ping-Pong table has been a longtime goal for the company," says Khoo, Penny Arcade's director of business develop ment. "We just knocked out a wall and took over the adjoining office, so we finally have the room." Khoo, 27, met Holkins and Krahulik five years ago. A business analyst at a market strategy firm, he was discussing an advertising deal with the pair over lunch at the Golden Chopsticks restaurant in Redmond, Washington. "I realized right away that they had no idea what they were doing," he says.

Holkins and Krahulik were booking their own ads and charging "about 98 percent less than they should have been," Khoo says. They had signed away book publishing rights to a guy who moved to Alaska and refused to pay them. They hooked up with a dubious Net company and nearly lost the rights to their intellectual property and the name Penny Arcade. When Khoo met them, they were living off donations from readers and contemplating the prospect of day jobs again. "Jerry and I are good at making comics and being funny… and that's it," Krahulik concedes. Khoo coaxed them into a second meeting and presented them with a 50-page business plan. He offered to quit his analyst job and work for them free for two months. "They should not have trusted me," he says. They did. Holkins looks back in astonishment at what easy prey they would've been for an unscrupulous person looking to get their hands on the business. "Luckily, Robert perceived greater value in fixing us to the front of his chariot and riding us forever," he says. Khoo has created a successful business model that includes merchandising, creative services, and book publishing (they've recovered the rights). But the centerpiece is online advertising. A bell rings in the office, signaling that the Penny Arcade sales department has just closed another deal on a banner ad from a game publisher. As with every ad that appears on the site, the potential advertiser first had to send over a copy of the game, and Holkins and Krahulik had to deem it worthy. "There were fights about that at first. We'd swat down a $20K buy that Robert had spent weeks working on," Holkins says. "But he quickly realized that our choosiness helps him." Listen: Tycho Brahe's "My Belruel" https://www.wired.com/wp-content/uploads/archive/images/multimedia/magazine/1509/My_Belruel.mp3 Today, Penny Arcade Inc. makes almost half of its money from ads and more than a third from merchandising. (Holkins and Krahulik refuse to disclose revenue, but it's probably safe to say it's in the low seven figures.) Part of that comes from a lucrative sideline making ads for game publishers, including Ubisoft, Vivendi, and Blizzard. "If we like a game, we can offer lots of cool services," Holkins says. He plays an MP3 of a song he's created using a Nintendo DS game called Jam Sessions, which simulates an acoustic guitar. It's a hilarious, surprisingly melancholy ode to a murdered videogame character, and about the best advertisement for the guitar game imaginable. Meanwhile, Krahulik and Kiko Villaseñor, the staff graphic designer, have decided on the logo for an upscale line of shirts, complete with collars and buttons. Every year, they sell hundreds of thousands of dollars' worth of T-shirts emblazoned with their characters and catchphrases. "But not everyone works in a place where you can wear T-shirts," Khoo says. "Especially T-shirts that say boobies, which one of ours does." (That extremely popular item references the classic math-club gag of tapping out "5,318,008" on your calculator, then turning it upside down.) The line of shirts, called First Party, won't feature any Penny Arcade references — just a simple joypad insignia stitched over the heart, like the polo player on a Ralph Lauren shirt or the crocodile on a Lacoste. If the tiny status symbol isn't enough to coax fans into buying adult clothing, each garment will also come with a helpful pamphlet explaining the rules of fashion to sartorial n00bs. The clearest evidence of the clout Holkins and Krahulik wield is the Penny Arcade Expo. This year, 30,000 fans will descend on Seattle in late August and pay $45 a pop to attend the fourth edition of their annual convention. PAX is the biggest gamer gathering in the country now that the Electronic Entertainment Expo has been drastically scaled back. E3 became infamous for expensive demo booths pumping out trailers at deafening levels, chart-topping rock bands at lavish company-sponsored parties, and appearances by major movie stars flogging the game adaptations of their latest flicks. The biggest publishers decided that the escalating expense of the event could not be justified, and last year they all dropped out. PAX isn't geared to retailers and the media like E3 was; it's dedicated to entertaining hardcore gamers, the sort of people who like Penny Arcade. "E3 was like a world's fair," says Josh Milligan, director of digital marketing for Ubisoft. "PAX is like Woodstock." His company is a sponsor of PAX and will host a contest in which some lucky fan of the anime Naruto will win their weight in ramen. Holkins and Krahulik will sit on discussion panels and emcee an epic cyber-tournament. (Last year, the winner took home a Scion outfitted with an Xbox 360. This year, the grand prize is $5,000 and an all-expense-paid trip to the Tokyo Game Show, PAX's only remaining rival.)