dwlt.thinksOutLoud

The Business of Art

Mule Design: Getting Comfortable With Contracts:

I am a designer. I work for a living, I solve problems within a set of constraints, I hire people, I rent space, I pay bills, and I have payroll to meet. These things are not in addition to the job, they are A PART OF the job. None of this came naturally to me. I had to learn it all.

Jay-Z, writing in Decoded:

But whoever said that artists shouldn’t pay attention to their business was probably someone with their hand in some artist’s pocket.

Ed Burns explains why it matters:

For me, it’s about the ability to make another one.

Innovative Consumption

James Surowiecki in the New Yorker:

From a business perspective, the willingness of consumers to take risks means that new technologies can see profit faster here than they can elsewhere. That encourages inventors to invent, and investors to pour money into startups. (It’s no coincidence that the modern venture-capital industry got its start here.) And the speed with which successful products are taken up also allows companies to benefit from economies of scale sooner, bringing prices down and making it easier to reach even more customers.

Essentially, perhaps it wouldn’t matter if Facebook or Zynga or Dropbox were UK companies (assuming they were reliant on UK consumers only). In other words, the US is how to build your audience for something new.

Incidentally, yesterday Ian Livingstone asked how we could have the next Zynga be British. I’d say it’s already been and sold itself to EA for a large amount of money: Playfish. And related to the above, they focused on the US from day one.

PopCap’s Hidden Gems

Amongst all the chatter about PopCap’s likely IPO later this year, and the success of games such as Plants vs Zombies, Bejeweled and Peggle, one thing that’s missing is a discussion of what underlies PopCap’s ability to even consider an IPO: predictability. Games are generally considered to be a hit driven business (and by extension, a miss-led industry), so how do you mitigate those concerns? In my mind, that comes from an aspect of PopCap that I’ve seen zero comment about: their ability to manage their games and brands.

Everyone knows about the success of Bejeweled, Bookworm, et al, but I haven’t seen anyone talk about their many hidden object games. How many, exactly? Let us count them:

  • 4 in the Amazing Adventures series;
  • 4 in the Mystery P.I series;
  • 2 in the Escape series;
  • Vacation Quest (I’m going to guess this is the start of a new series).

For those skipping ahead, that’s 11 in total, from their current line-up of 28 PC downloadable ‘favorites’ (source).

Given that these games can easily sell in their tens, if not hundreds, of thousands, and that PopCap have produced multiple editions within each franchise, something tells me they’re not doing too badly out of these games.

These may not be the games that win the plaudits and awards and press, but I’m pretty sure they contribute to PopCap’s bottom line in a reasonably predictable manner. They may well be the equivalent of EA’s annually updated sports games, but without the massive licensing fees attached.

An even more undiscussed (is that possible?) aspect of this ability is the way they take their games to as many platforms and sales channels as possible, including boxed product at retail. From everything I’ve heard over the years, PopCap’s games do phenomenally well in stores such as Wal-Mart, Target, etc. Bear in mind that not everyone has a broadband connection, even (especially?) not in the US, so this is still an overlooked channel for most game creators; one that PopCap’s games fit perfectly. I wouldn’t be at all surprised to see retail forming a large portion of PopCap’s income.

PopCap’s ability to nurture their franchises gives their games a far longer shelf-life than is normally associated with the industry. The Bejeweled series is the prime example of this, having sold more than 50 million copies since it’s debut in 2001, but they’ve repeated the formula over and over. They’re amongst the best brand stewards in the industry, alongside Blizzard, Nintendo, and Valve.

All this predictability allows PopCap to then go off and experiment with any number of ideas. They can take an extra year to finish Plants vs Zombies, to make sure it has the right level of polish. It means they can introduce new brands, and invest enough to ensure success in the market, resulting in more growth as they take the game to the myriad platforms that exist today.

To an uninformed observer like me, PopCap’s business model seems perfectly designed to support being a public company. Actually, scratch that; whether public or private, they seem to have the model pretty much nailed.

On Tax Breaks

[This has been sitting in draft for a while. I thought I’d post it in advance of the budget this week.]

Way back in June 2010, the government decided to axe the proposal made by the previous administration to provide the games industry with some sort of tax break, saying that the proposal was “poorly targeted”.

On the back of that, industry reaction was along the lines of “no, it’s really well targeted, look it says specifically ‘games’ on it”. However, it strikes me that “poorly targeted” actually means “too narrowly targeted”. Ontario’s much vaunted games tax relief isn’t games tax relief at all; it’s actually digital media tax relief. This gets around the “what is a game?” problem by allowing anything digital and interactive to qualify.

The other aspect of Ontario’s tax relief scheme that I never see mentioned in the UK debate is the fact that a company only qualifies for the scheme if they spend over CA$1 million per year on employment costs. That equates to around £625,000 in real money. If we assume that an average development company spends around £5,000 per month per employee (and that any system in the UK imposed an equivalent threshold), a company needs to employ a minimum of 10 staff. Given the transition of the industry towards smaller, one-project companies, how many in the UK would actually qualify?

In any case, I think the call for tax breaks won’t succeed this time around, or at any time during this administration. For one, the Tory party really don’t like to target any one specific industry over any other. For another, there’s the administration cost to consider – any such scheme would introduce more bureaucracy and paperwork at a time when David Cameron is ranting against such things in a speech to his party. Ideologically, there’s a belief that the best route to economic growth is to enhance the fundamentals for every business and industry, not just the select few.

TIGA’s recent call to expand the existing R&D tax credit seems logical and sensible, and may well gain support (though I’d be surprised if it happened this time round). However, I know that a number of games companies have successfully claimed on the scheme, so perhaps not that much would be gained.

At any rate, do I think tax breaks would be a good thing? They’d probably be useful to some extent. However, I don’t believe that they’re required to build successful businesses and a successful industry, and I certainly don’t believe that having them would somehow instantly and magically safeguard the UK industry.

Reading/Watching

Some stuff I’ve been reading and watching recently:

John Lennon on Songwriting

(via hitrecordjoe)

Nathan Martz & Tim Schafer on Once Upon A Monster

Frankly, I feel kind of the same way about video games right now, that we’re not nearly as creatively broad as we could be. We often stay very safe, and safe in some pretty often reprehensible directions, or at least thoroughly uncreative…. I think our medium can do many more things than that.

I heart Double Fine in a big way at the moment.

The Importance of Silhouettes

… a key method for making sure that a Pokemon truly doesn’t overlap with ones that have been created in the past is that they render it in silhouette completely black, and compare its shape with past designs. Each silhouette must be completely identifiable as different from others.

I’ve spoken with people about this in the past, and it’s one thing the games industry generally tends not to do that well. The characters of Team Fortress 2 are a great example of where it is done well, though.

On PopCap’s IPO

A post on Gamasutra (misleadingly captioned as being ‘In- Depth’) discusses the possibility of PopCap going public later this year. I have some “issues” with it.

But the transition from a privately held developer/publisher into a public one usually results in some changes to the corporate culture …

Does it? Citation needed, I think. I honestly can’t think of any comparable example. Kuju and Warthog are two developers that went public in the UK a decade ago, but they weren’t masters of their own destiny. PopCap are.

Billy Pidgeon, senior analyst of M2 Research, then chips in:

They have sort of a Disney or Nintendo thing going on in that there’s a certain expected quality to their games. … I’d really be concerned about their growth strategy, as it could cannibalize the elements that have made them successful so far.

Correct me if I’m wrong, but Disney and Nintendo are both public companies, aren’t they? Both companies growth strategies are predicated on exactly that “expected quality”. Why wouldn’t that strategy work for PopCap?

As the article notes, PopCap has gone from $0 to $100 million in 10 years, and is evidently making $1m per month just from Bejeweled Blitz and Zuma Blitz. It’s strategy appears to be working.

Pidgeon notes that despite the company’s growing reputation, it still takes pains not to rush titles.

I’d argue that the “company’s growing reputation” is exactly why it takes pains not to rush titles.

Clearly, I have no idea if PopCap will go public or not – I believe they’ve been preparing for it for a couple of years, though (based on who joined their board and the fact they started talking a lot more to the press). The success or otherwise of the LinkedIn IPO will be just one factor.

All I’ll add is that going public the week after Toy Story came out didn’t do Pixar any harm in terms of their culture and growth strategy.

Of Creativity and Counterfeits

The dilemma of copycat games has long been purely an ethical one and rarely a legal one, but perhaps we’re speeding towards a court-ordered stance after all these years of gentlemen’s agreements and surly acceptance. Patents, trademarks, code and artwork have been protected, but ideas haven’t. Should they be?

So begins an editorial piece on GamesIndustry.biz (registration required). This is another of these recurring issues for the industry, as this article by Colin from Denki in 2007 neatly illustrates.

As Colin noted, the games industry needs to be able take ideas and build on them, twist them around, and make something the creator considers to be one better. That’s exactly why you can only protect the implementation of an idea and not the idea itself, and it’s largely what “creativity” generally means. Games aren’t unique in relying on “weak” intellectual property laws in this regard: fashion, food, music, magic tricks, and in fact, design in general all work in this way. Without this setup, as a simple example, Gimme Friction Baby would not have spawned Orbital. It’s how genres such as “autorunner” come to be.

Where we run into real problems is in the situation of “The Blocks Cometh and, er, The Blocks Cometh”, where someone is selling an iPhone version of a Flash game without authorisation, using all the original graphics and design elements. That’s counterfeiting, a “fraudulent imitation of something else”, to quote the OED. And this is where the “strong” intellectual property laws of copyright, trademarks and patents come into play. If you own copyrights and registered trademarks, you can prevent counterfeit games trading off your success.

I’m not a lawyer, so this is most definitely not legal advice, but, as an IP owner the onus is very much on you to enforce the protection provided to you by law (it’s certainly not up to Apple, as GI.biz imply). If you choose not to enforce that protection, you’re giving tacit permission for the counterfeiter to carry on. Worst case scenario is if you ignore some cases and try to enforce others, you may well forfeit your right to legal protection altogether.

In short, if you have something you think is worth protecting, you’d better figure out how you’re going to protect it.

90% of the Work

Neven, talking about The Incident:

A month into it, we were sitting on a surprisingly large chunk of the engine all ready to go, a concept well proven. It was everything else that took months and months more.

and

The pitch for the game isn’t half the work; it’s barely 5%.

In case you were wondering.