Catch Them if You Can
At Activision Blizzard, Tippl reckons that with games such as World of Warcraft the company has lessons to offer the digital industry about how to develop dependable revenue streams from an online community. “These are things that Facebook and MySpace and so on still have to figure out how to do, and it’s a big step from offering a product for free to charging for one,” he says. “We are already there. We are already monetising that user base, and as a result I think we have a big advantage over many of the media companies.”
Media companies are keen to catch up. Disney has been investing more in its inhouse games development studio, while Warner Brothers has invested in UK publisher SCi Entertainment. “Gaming companies are attractive targets for media players,” says Williams at BMO Capital Markets. “As the consumer today is looking for more dynamic and interactive forms of entertainment — and these games really represent that — I think other companies not currently in the games category will get more aggressive to find a way into it.”
Tippl is not concerned. “It’s one thing to identify a fast-growing segment that is very profitable. It’s another thing to actually figure out how to get your piece of the pie,” the CFO says. “Video games have many unique features and require different skill sets from the music business or the movie business. We are quite comfortable with our position.”
Economic woes do not seem to be keeping games industry chiefs awake at night, no doubt to the envy of those in other industries. CFOs and industry experts agree that the games sector has proved reasonably recession-proof in the past — consumers who enjoy video games consider them good value for the hours of entertainment they get. Tippl sees no reason for that to change, credit crunch or not. He reasons that consumers have little else to take up their leisure time. “They can’t afford to drive anywhere because the gas prices are so high. They can’t afford to dine out, so they’re going to spend more time at home,” he says. “What else are they going to do? They’ve got to be entertained somehow.”
Tim Burke is senior staff writer at CFO Europe.
You Got Flagshipped!
As any keen video game player knows, there are plenty of pitfalls along the path to being a winner. That goes for the publishers and developers of the games too. And it seems that the smaller the publisher or developer, the more pitfalls it faces, especially if it is too reliant on only a few games which may quickly fall out of favour with gamers. “Small guys can win [in this industry,]” says Phil Stokes, an entertainment specialist of PricewaterhouseCoopers. “The question is, can the small guys win consistently?”
It’s a question that SCi Entertainment, a UK-listed publisher that owns the Tomb Raider franchise, has struggled to answer. Its shares have fallen as takeover speculation failed to produce a bidder, and the board given a shake-up, with former CFO Phil Rogers taking over as CEO in January this year to head a turnaround. Analysts claim the company has been too reliant on too few brands. The company now expects its results for the year to July to show a loss of up to £100m (€127m), on revenue of £134m.
Delayed product launches have also dogged the company, but addressing the issue requires a balancing act. Stores need the games on time, but companies risk alienating consumers if they launch them with problems that could have been sorted out. California-based Flagship Studios, developer of Hellgate: London, a PC game set in a post-apocalyptic London 20 years from now, learned the hard way. When the game was released last year, it was riddled with bugs that disrupted playing. Blogs and websites proliferated for disgruntled players to gripe. But even a “patch” released to fix the problems caused uproar when it wiped players’ previous scores. Now some gamers refer to other games released before they’re perfected as “Flagshipped.” That’s the kind of brand recognition companies could do without, and Flagship was winding up its business as of mid-August. But with one Flagship founder already back in business as head of the new Runic Games, the story shows another parallel between games’ developers and players: even if you die a horrible death, there’s still a chance to get up and continue.