Firstly, can you provide us with some background to how this deal has come about?
When we sold Kuju to Catalis a year and a half ago one of the things they provided was the financial support and infrastructure to help us expand the business. So since then one of my main roles has been to manage the integration of Kuju into Catalis and also find new opportunities. I was actually looking at India and Canada primarily as ways to grow our talent in a more cost-effective manner. I feel we've got enough staff in the UK – we've got at great talent-pool in the UK, but growing it is a challenge from both a recruitment perspective and a cost one. So we were looking to expand our business - but do it elsewhere in the world.
My main focus at that point was India, but the opportunity in the Philippines was unexpected. Kuju America were working on the conversion of an arcade title for the Wii – which incidentally has just been completed - and this team in the Philippines, Matahari, had actually developed the original original game. At the time they were owned by an Australian entertainment conglomerate but through talking with them it became clear that both were looking to restructure their business and we had the chance to acquire the studio. We were impressed by their talent, even though they had worked in the parallel space of arcade games. We'll be using the studio to support our growth in a number of areas.
Can you tell us which areas?
Primarily, the new team is a base for growing our talent resource and in the immediate future they will be used to create vertical talent silos. A lot of studios have used art outsourcing for an number of years, and we've done it for over the past five years. Now we want to build up special silos dedicated to areas like art, animation, user interface or coding – in short, specific areas of expertise – and each will be tied to one of the other Kuju studios. So for instance Zoe Mode might build some specific music expertise out in the Philippines, or our Unreal studio might look to recruit and train up people as content creators experienced in Unreal at the studio.
The team is currently at 20 people and we plan to double that over the next year. Ultimately, the aim is to provide some 'captive' outsourcing talent for our studios to use.
Was cost or access to talent the motivating factor for the move?
It's both. Probably in equal measure, Our growth is limited, certainly in the UK, by access to good talent. If you want to build a new team it takes a number of months to do that in the UK – and possibly even building a big team is next to impossible there. Whereas in Asia we can find significantly lower cost talent who we can hire and train up. That gives us a good stable base for the future. And on an ongoing basis the costs are still low - which enhances our cost base. So it really is both access to talent and the cost of maintaining it which has influenced this decision.
A lot of people are targeting Asia at the moment. Do you think you've caught an opportunity in that market at the right time?
Yes, our initial goal is very much using the access to people out there and the lower cost to service the rest of the studios. But in the medium to long-term goal we want to have a business out there that understands the local business environment. And in the medium to long term we expect the studio to start targeting development as an autonomous studio and work with the publishers in China and elsewhere in Asia. That won't be the focus in the next 12 months, but the studio is great springboard for us when that market starts to mature and it grows a more stable independent developer to publisher model, which isn't there yet.
You said you had looked in the more obvious places like India and Canada to expand - were you surprised by the market that is currently in the Philippines? Most people think 'Asia' and they think Korea or Singapore...
Certainly - and my first thought would have been to look at what we could do in SIngapore. But I was surprised that there was a umber of developers in the Philippines, although it is still clearly in the early stages. The studio itself is run by an ex-pat who was hired by the former Australian owners, and he's been instrumental in building the local chapter of the IGDA and has been working with local universities to get the right training in place. So it's still a young enough industry, but the studio we have acquired has for sometime been trying grow it and we'll continue to support that.
Kuju America only opened six months ago, now Kuju Manila... will Kuju expand internationally any further?
I think we'd have to see how the market goes. Certainly as we grow the business, if the opportunity arises to expand elsewhere then we'll take it – and we're unlikely to do that in the UK due to costs and the fact there is a fixed talent-pool. So we'll look to double the numbers in the Philippines and if that works then yes, we'll look at again at India and Canada. Perhaps not in the next few months, but through 2009 and 2010 as we look for more opportunities.