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  • Relationship Management – GameON: Finance Day Two Recap

23rd January 2012

Relationship Management – GameON: Finance Day Two Recap

GameON FinanceOrganized by Interactive Ontario, GameON: Finance connects the games industry’s leading players to new business opportunities in the interactive entertainment industries.

The final day of the two-day event wrapped on a recurring discussion of relationships and the importance of building and nurturing the right ones for both your studio and your games.

Make sure you are setting up the right relationships for your studio

Whether looking for venture capital, an incubator/accelerator, publisher, or other funding partner, every speaker emphasized the importance of understanding your needs and thus ensuring that you are approaching the right partners.

If looking to partner with an incubator/accelerator program, the key to success is the proper fit. Amar Varma of Extreme Venture Partners warns, “Not everyone has all the tools you need. If you can’t leverage success in an incubator/accelerator into something bigger, why would you do it?”

In their talk about how game studio Massive Damage and accelerator Year One Labs collaborated on “Please Stay Calm,” Ken Seto (Massive Damage, Inc) and Ben Yoskovitz (Year One Labs) echoed Varma’s sentiments. Noting that the purpose of an incubator/accelerator is to help studio owners raise capital and build the studio, every program has its own mandate and focus, making it important for the studio to know what it is about and what it needs.  Yoskovitz advised start-ups to look for facilities and partnership offerings beyond office space and ancillary services.   He calls incubators a “dotcom concept” because today, finding physical space is less of an issue.  Start-ups should have their own legal and accounting support in place, and look for incubators/accelerators with actual private investors who can help raise capital and/or advise on growth.

When looking at distribution platforms, Neal Sinno from Arkadium reminded the audience that there are more user communities for social games than just Facebook.  Case studying the Arkadium title “Mahjongg Dimensions,” Sinno discussed the company’s experience with Pogo.com, noting that every portal has “their own wants and needs,” both technically and with social mechanics.  Building partnerships can lead not only to new opportunities for your games, but also additional support with technical needs and integration requirements.

Relationships in deal-making

According to Brad Young of Flashman Studios, the key to successful relationships in the B2B (business-to-business) market is to “structure the deal properly to ensure everyone is happy to succeed together.  Getting the right kind of money from the right kind of investor is very important in this industry.”  To do so, it is also important to “understand the criteria of the partner they are pitching to,” added Jonathan Newth of Tenshi Ventures.

Also key is understanding the role of the organization you are doing business with.  On a panel of publishers, Zack Karlsson of Capcom emphasized that developers tend to focus on their projects, monitoring the market between titles.  Publishers, meanwhile, are monitoring the marketing all the time, making them more adept at positioning the game for launch.

Careen Yapp of Konami agreed, noting that “strategies change every quarter.”  And because of this rapid pace, she additionally recommended the importance of speaking to publishing partners as early as possible in the production process to get your title on their radar and solicit feedback.

Karlsson cautioned that while it is important to solicit feedback early, “don’t make changes without a contract. Don’t build your game for free based on what publishers say, and then end up with feature creep before production even starts.” The key is to take the feedback you find relevant and not because you feel you have to. That said, it is equally important for developers to “keep your big boy pants on” when meeting with potential partners.  “It is important to be engaged and passionate, but not so personally invested” that you take offense to the feedback.  In the case of publishers, the relationship runs more smoothly if they can be “direct and honest.”  When developers and studio heads “get bent out of shape,” they are seen as an “energy draw and high maintenance,” which could make the publisher reluctant to partner with you.

Many panellists with chequebooks emphasized to the audience that the money is not being provided out of goodwill.  They are in the business of making money and expect returns on their investments.

Martin Soltys of TransMedia Entertainment Partners observed that, “Producers don’t respond well to the idea of paying money back,” and that there seems to be a “sense of entitlement” by content creators when it comes to equity investors.  He recommends that when approaching financial partners, studios have a clear statement of purpose for the money.  And if someone is offering you your first deal, think strongly about taking it, cautioning that a better deal is likely not going to come around until you have some traction.  If someone is investing in you, it is because they see positive potential returns.

Young notes that every deal is different, and is dependent on the relationship.  There are many options (like revenue share on flat contribution, a percentage, upfront payment, payments in tranches unlocked by metrics), but it depends on the game and the objectives.

Many speakers highlighted the importance of maintaining your relationships, and that your network is your best asset, with Soltys noting, “Relationships are about the destination, not the game.”

Your relationship with your users

To get above the noise of the plethora of game content available to users, is of utmost importance to ensure that you respect your users – new and established.

Peter Satuerbrei from Robomodo reflected on his previous experience with crowdsourcing, imparting on the conference attendees that they ensure what they are presenting to potential contributors is the right message for your game and your development team.  Be honest about what you are making and how, as “it affects what you can ask of the community.  It is a fine balance between what you need and what the community is willing to contribute.”  If yours is a newer, less experienced team, you may not be able to raise as much as a more experienced one, but users appreciate the clarity.

Respecting the users’ opinions can also affect your productivity.  Echoing Jason Della Rocca’s talk on day one about validated learning, Steve Fowler from [a]List noted the opportunities of crowdsourcing as a validation of concept.  “If the game is not well-known, it is an opportunity to promote the game amongst gamers to determine interest.”

Karlsson commented that to succeed, “games will need to reach out to communities to keep up with the changing (business) models.” He also noted that pricing models are adjusting. “The middle tier pricing model will disappear.  If you’re going to go for the 99-cent model, put your money where your mouth is and charge more for the creative value.  (Soon) content will only sell for 99-cents if it really is a 99-cent experience.”  However, due to the strengths and limitations of the various gaming platforms and distribution channels, we “won’t see $30 content in the app stores any more than we’ll see $10 content at Best Buy.”

He also highlighted the importance of a proper strategy for DLC (downloadable content).  “The audience won’t tolerate being milked … consumers evaluate DLC as either content feeling “owed” (charging for something that should have shipped with the original release) versus ”oh, that’s extra” and has value.

For success in the free-to-play market, John Walsh of Fuse Powered says the key is to “make a game that users like, will play, and eventually want to contribute money to” and that it is about “charging the right amount of money for the right things at the right time.”

Future opportunities

While the industry matures and standards are being established, investors and publishers are watching for innovation, particularly in game play and monetization models.

“There is an opportunity for people willing to buck the trends and not follow,” according to Karlsson, which he says is due to the “disruptive technology potential.”  Soltys also notes that the “new innovations are the ones not bound to scale.”

About Interactive Ontario

Interactive Ontario (IO) is a not-for-profit industry trade organization committed to the growth of the Ontario interactive digital content industry. To this end IO is an industry advocate within Ontario and nationally as a founding member of the Canadian Interactive Alliance /Alliance interactive canadienne (CIAIC).

IO represents over 290 interactive digital media companies covering a range of sectors including: e-Learning, video/online games, mobile, television, and social media. IO also works with many interactive digital media stakeholders including those working in marketing, law, accounting services, research and academia.

Sasha Boersma is an independent business analyst & consulting producer for the Canadian interactive, convergent, and games industries. She is active on twitter (@sashaboersma) sharing general insights and news about and relevant to Canadian IDM, and blogs on the business of the Canadian interactive digital media sector at www.bewareoftheleopard.ca.

This entry was posted on Monday, January 23rd, 2012 at 10:32 am and is filed under Business News, Editorials, Events, National News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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