Two events have dominated Codemasters’ year to date.
In April, the seriously big Indian conglomerate Reliance ADA bought a 50 per cent share in the company, becoming the publisher’s co-owner with VC company, Balderton Capital. At the time, CEO Rod Cousens said the future had never looked brighter”.
He was proved right quicker than most expected as, in September, the second major moment of the year saw Formula 1 2010 go straight to the top of the charts.
Looking back on the achievement, Cousens says that when the news came through, the entire company was walking round with their heads held high and their chests puffed out – and they absolutely deserved it”.
The game saw F1 returned to the racing line in the games market. Before then, the franchise had been held by Sony and was exclusive to PlayStation. And before that it had been a somewhat underwhelming part of the EA Sports catalogue.
In 2008 Codemasters won the rights and in 2009 released a Wii and PSP game, but this year was the full-throttle comeback – a bona fide brilliant game on all formats, with worldwide sales of two million units and a UK chart-topper to boot.
Cousens says that in the pitch process there were plenty of companies that would have paid more money” for the licence, but the fact that racing games are in the DNA of Codemasters” triumphed.
The challenge now is to make the F1 game part of the Codemasters canon for the long-term – and crank it up on an annual basis. FIFA on wheels.
The rigours of the F1 license of course, are a challenge was well as an opportunity. The terms, you imagine, are as constricting as a MacLaren cockpit. The cars can’t sprout guns and there’ll be no slipping in a zombie level – not even for return of the living Schumacher.
But it remains the pinnacle of motorsport and is the second biggest sport in the world (after football). So, Codies is keen to stay in pole position.
The current deal is until 2012, so there should be two more main iterations. But Cousens is looking further into the future. We want to make it as difficult as possible for anyone to take it off us. Don’t forget, there hadn’t been a game on the market for two years when we took this on, so unless Formula One Management want to go through another period like that…
Plus, we’re not just going to hand over all our technology. We’re not being complacent, but someone would really have to go some to beat us, and I’m not sure who’s out there that could.”
As well as F1 2011, which Cousens says will definitely not be a few new tracks and a few new drivers”, Codemasters is looking to extend the brand in the new year with a browser game and a game on all mainstream formats aimed at very young kids”.
He also reveals that the franchise will debut on new handhelds next year. And yep, he used the plural. So 3DS, yes, and PSP2, too, presumably.
INVESTING IN THE FUTURE
The success of F1 was a pleasant introduction to the mainstream games market for Codemasters’ new investor, Reliance ADA.
The Indian business group has global revenues of $14bn and a market cap of $81bn. It has a range of divisions dealing in power, insurance, communications, property and plenty more. Oh, and it also owns 50 per cent of Dreamworks.
Cousens reflects: The company had taken on debt to fuel growth and the debt was held by a consortium of hedge funds”, he explains. That proved a heavy cross to bear, particularly in an economic environment in meltdown. So the debt was converted to equity, which gave the hedge fund consortium a significant share in the company.
At that time, Reliance came in to buy out the hedge funds and acquire a 50 per cent shareholding, alongside Baldertons on an equal basis.”
Cousens insists that, despite coming from such different backgrounds, both major investors are aligned. But he does acknowledge that their agendas are different in terms of what they’re ultimately after: One is a significant technology company, with interests in mobile phones, data centres and, with their investment in Dreamworks, motion pictures. The other is a venture capital company whose business is to seek an exit. So, you would expect one to grow its interest in the business and one to exit the business. And those positions could easily become mutually entwined.”
Cousens is keen to emphasise the benefits this new investment has brought – and will bring: Given some of the past speculation about us, what can’t be underestimated is their financial standing. For others that may not have been an aspect they would make reference to, but for us it is.
The second part of it is the areas in which they participate, both in terms of geography and market sectors. They give Codemasters an immediate ability to access those markets, particularly India, which may be small today, but will not be small tomorrow. I know of no other publisher that has that position.”
He also mentions the significant development and support resource that could be established in India. So maybe a studio on the sub-continent sooner rather than later – or at least a QA facility.
Reliance are also in the casual space with Zatpak and mobile games with Jump. So we can overlay our business by extending franchises such as F1 and Cricket – that’s found money for us.”
In the background, of course, there’s the Dreamworks connection. We have to explore ways of doing something with them,” says Cousens. We’re conscious of the fact that THQ has a relationship today, but we’re also conscious of the fact that one of our principle shareholders is a 50 per cent shareholder there, too.”
More immediately, in the first half of 2011, Operation Flashpoint and Dirt will return, whilst a new brand, Bodycount, will be introduced.
Launching new IP is, of course, notoriously tough. But Cousens believes Codies’ business model, as much as the talents of its Guildford studio, where the game is being developed, means it stands a chance.
Our costs are such that we don’t need to sell four million to get a return. We target products that can sell 1m to 1.5m units and that’s a good place for us. If you need to sell four or five million to survive, well, look at the overall business, those products are in short supply.”
Bodycount remains, of course, a risk, but one that can be taken by a company that has genuinely done what many other publishers only talk about: pared down its portfolio to a handful of strong franchises.
It’s also a company with a cache of technology, much of it proprietary, coupled with a studio system that drives quality; a company with a nimble corporate infrastructure; and a company with the backing of a group as big as any in gaming, with serious stature in sectors and territories that will only grow. It’s quite a formula.