Digital reverberations Part Two

In part two of our interview with the CEO of Reverb communications, Doug Kennedy tells us his secret for success in digital publishing, chats about barriers to entry in the industry, and gives some advice to developers looking to go digital.

So what is it that makes a game like Dungeon Defenders sell a million downloads?

You’re looking for the secret sauce, huh? 

Yeah, what’s your secret?

We’ve all seen devlopers over the past few years getting nailed by publishers. Developers do a deal with publishers, the publishers say we’re going to give you a back-end on the game. The game goes out and sells and the back-end never shows up, the developer’s looking for his next milestone payment when the game’s finished and they don’t have any money. 

So the developer says, "Okay, let’s go try to do something on iOS." Well iOS has become the shovelware platform and it’s been very hard to put a game up there and make enough money to support a company. 

So now the developer looks around and says, "let’s look at Steam or PSN and let’s make a game on one of these other platforms." Well, they might go out there and try to do something on their own because they’re so gun-shy with publishers, that they ultimately say, "let’s just do this on our own. We can write a press release, so let’s just do this." 

What they don’t understand is that in many cases, just writing a press release isn’t going to be enough; you have to build a community. So now that game on the digital platform has failed. So now they’ve got a failed game going to retail, a failed game on iOS, and potentially a failed game on the digital console platforms. 

That’s usually when we try to swoop in and talk to them. It’s not that they’re bad developers, they just haven’t had that extra push to get them over the finish line. What we do is say, "We’re not the development experts, but we know how to work with marketing and public relations,and building communities, and working with first parties, and getting things ready. So if you as a developer will focus your attention on building the game, and let us focus our attention on building the community and building the awareness, we can have a nice marriage and a partnership. 

The other aspect of it is that many companies in our space still have a retail mentality. They choose a launch date, they decide when the game’s going to come out, let’s say on June 1st. most of the marketing they do will fall in advance of that June 1st date. 

Now, that makes sense when you’re going to retail, but when you’re going to the digital platforms, the way we approach it is, about thirty to forty per cent of the marketing for a game happens in advance of the launch of that game. When that game goes live on June 1st, we have about sixty to seventy percent of our programs that take place after the game is live. That includes support for DLC, support for the developer, how we launch different content, new introductions to different characters and things like that. 

So you’re saying there’s a major crisis in the industry, and the secret sauce is support to developers before and after release?

I agree with that in a sense, but I don’t think the publishers recognize it as a major crisis. Publishers are in a power position, and developers are out of cash; who are developers coming to? It’s like a drug addict, right? They go walking back to the publisher saying, "I’m out of money and my staff’s gonna be laid off. Do you have a project you can give me so I can keep feeding these guys?" And the publisher goes, "Yeah, let me give you another project." This versus having a developer that has built up an intellectual property library, has cash flowing in from digital projects, and can build the games that they want to build, rather than the ones they’re being told to build by the publishers.. 

So when you have developers who aren’t beholden to the publisher’s dollars, and are able to build the sorts of games they want to build, it’s a much healthier industry. The publishers won’t see it this way. They’re going to look at these kinds of comments and say "this guy’s crazy," but at the end of the day, I don’t see publishers building a lot of games. I see developers building games. 

So is the power of digital about giving developers that continual stream of income, as opposed to retail, which you say is ortof a lump sum with maybe a trickle later on?

Well there’s a trickle laters on, but there’s too many hands in the cookie jar in the retail market. Everybody’s got their fingers in there, and who’s the last person to touch to cookie? The developer! He’s built the game and then handed it off to a publisher, who then goes to a rep firm, and a retailer or a sales firm, and when the consumer buys the game they all collect the money before the developer. If there’s any of that trickle left over, our developer might see a couple crusty old bread crumbs thrown at them. 

If you go to the digital space, you’ve got a thirty/seventy split whether you go to iOS, PSN, XBLA or whatever, and the check goes right to the developer. How can you argue with that? 

So with companies like THQ taking hard hits after putting so much money into AAA title like Homefront… 

And how’d that work out for them? 

Exactly. How has this kept going for so long when it’s such a high risk taking new titles to retail? 

Well it’s been about feeding the beast. Take a look at a company like Activision with titles like Guitar Hero, who has had a very strong quarter and is very much one to watch; they just keep feeding the beast. Whether it’s franchises like Guitar Hero, which we were involved with, or Tony Hawk or what have you, they’ve got to continuously find new revenue sources to impress shareholders and feed that stock valuation. 

At the end of the day, if you take a look at THQ which you mentioned, if you don’t have enough new streams coming in, or you bet the farm on the wrong game or the wrong IP, your company can be in jeopardy or out of business. I don’t think any company at any level should put all their eggs in one basket. It’s business 101. 

I think that one of the challenges these companies face, if you look at a big publisher, they embed so many cost vehicles when it comes to a digital project, that it becomes unreasonable to think that they’re going to make any money on these digital games. They’ve got legal fees and this fee and that fee, and all these fees stack on. 

When you have a small publisher like with what we’re doing, or a small development team like what we’ve done with Trendy, several million or ten million dollars means a lot to us. Is that going to mean a lot to an Activision or an Electronic Arts? Probably not. You add up a bunch of those games maybe, but at the end of the day, those guys take a look at digital and are like, I’d rather bet on ten horses and have two of them break even, seven fail, and have one of ’em be a home run for us. 

Speaking of fees, do you think all the investment in DRM is helping, or hurting the industry?

Well look, at any level, you have to be able to protect your intellectual property. You can’t just have the freedom of tossing this stuff all over the place. We know who the groups online are who want to be able to do that- to open up intellectual properties and access IPs at will, but it goes back to… 

Well I was just on the phone talking with a group of developers about iOS and ‘Droid. You’ve got a market that’s been driven to ninety-nine cents or free, and I’ve got friends that bitch about having to may $3.99 for a video game, right? We’re talking $3.99 cents for a game a developer spent six months building and a ton of money, so it’s the same type of thing. 

I think that as consumers and the industry understands what goes into these games, and that, you know, investment is made, consumers shouldn’t have an issue putting money down when they’re going to play something as entertaining as an iOS game, a digital console game, or a PC title. 

But do you think that’s something that’s holding the industry up? I mean, digital download means putting a game out on the internet, at risk of piracy. Do you think that’s something that’s holding publishers back from taking the leap to digital distribution? 

Well it’s a cat and mouse game. You’re always going to have something like that. But I think that as they industry grows and matures, you know… Look, take a look at where we were five years ago in terms of digital downloads and where we are today. That’s been helped by some of the things that Apple and some of the other sites have done. 

You know, I think it will hold us back at some level, but like I said, it’s a cat and mouse game between the pirates and the legitimate companies that are trying to advance that side of the business. 

So do you use any DRM for your titles?

Well when we do our PC titles we’re primarily working through Steam. And I don’t want to get into anything about what our developers should be or should not be doing, but I can say I feel very comfortable about what’s happening on both the Sony and the Microsoft platforms. I’m not as worried about what we’re doing on Steam, but there’s always that concern that somebody’s going to be able to go in there and break out a title, and it’s going to affect our bottom line. 

It’s definitely a concern that developers should be aware of, but it’s very much a risks versus rewards sort of thing. Is it more risky knowing that you’re going to have fifteen hands on a cookie going to retail, or somebody cracking a game and you having to play that cat and mouse game where it’s being protected properly when it goes digital?

So you’re saying that most of the blame for the problems in the industry belongs to the retailers.

I’m placing most of the blame on the retailers because they’re holding up creativity by not taking the risk on new IPs. That’s a challenge. Where do the new IPs start up? They start on iOS, Droid, and some of the digital platforms. 

Wal-mart is never going to look at a new IP unless it’s being driven in there by Activision or Ubisoft or EA, with multiple millions of dollars of television support behind it. They’re going to have to build that new IP from that ground up. And that’s a challenge for small developers in this industry. You have a break out title here and there, right? 

Look at Guitar Hero. Guitar Hero luckily got the mindshare it needed to be able to break out, and Activision stepped in and managed to buy Red Octane, but it was a struggle trying to get that product onto the store shelves. Nobody wanted it.

I think that’s one of the inherent challenges in this industry. You’ve got a select group of probably six to ten buyers that work at the major retailers that ultimately decide which ones are gonna succeed and which ones are gonna fail. These are guys who probably don’t play a lot of video games. Are these really the people we want making decisions about what games get made and which ones don’t?

So do you have any advice you’d want to give to developers?

Yeah. Again, I think the passion and innovation in this industry is coming from development teams. And it’s not just about tossing a press release out there. You really have to understand, know and manage your community in taking your title to market. I think a lot of developers know this, but it takes a lot more time than you’d think. And once that games ships, it’s about supporting that title. 

I’m not telling you anything that is new or groundbreaking here. Supporting the title in a manner that hears what the community is saying, and delivers the promise of building a great game, and supporting levels of characters, and DLC, and new maps and things that support that game once it launches. 

Thank you for your time.