Emote founders Morgan O’Rahilly and David Rose explainwhy they think their new business could kick-start a new era of better business for games developers…
If you wanted, you could write a book about the current travails of games development, touching on a number of truisms which face the games development business: budgets are bigger because teams are bigger; timescales are longer because more content is needed making a modern game; risks are higher because your ROI arrives much slower.
Frankly, if it wasn’t for the increasingly diverse nature of the games audience – which in just the space of a few years has widened to include casual, younger and older players while core gamers find new ways to play the games they always loved via online channels and at different session lengths – modern games development, and indeed much of the traditional games industry, would be in dire straits.
It’s against this backdrop that relatively new company Emote has emerged. Formed by Morgan O’Rahilly and David Rose, the company – which calls itself a production company but is also a technology firm and games studio, with offices in London and Derby and a HQ in Liverpool – has a new approach to the way games are produced. But their philosophy doesn’t just introduce a new way to produce a game; instead pretty much everything Emote is about attacks the norms of current development deals and seeks to solve the problems named above and unite the result with games that are driven by what they term social content.
THE NEW SOCIALISM
The ‘social gaming’ element is what the Emote team say is a key difference to the norms of the development sector. O’Rahilly and Rose’s definition of social gaming is broad, mixing a variety of elements. It includes the firm’s in-house technology, the Emote Platform, and concepts from the online games and social networking space – even a dash of alternate reality games (ARGs) – to create something which “takes a game beyond the game client itself” says Rose, and “makes an experience accessible via web, mobile or other interfaces which in turn could spawn new types of gameplay”.
The Emote technology consists of a number of elements: the Emote Platform, which manages the connection to a 3D game client via a simple API; Emote Social, which monitors what players do in game and manages things like friend lists so all that data can be accessed outside of the game; Emote Char, a system which monitors and manages the player’s in-game character, and can even be ported over to other games; plus EmoteCast, which adds further connectivity and asset management.
Essentially, what it allows is the creation of connected games (including both single and multiplayer titles), with a twist informed by Facebook and MMOs. Gameplay no longer exists in just the gameworld, which would run on a PC or console, but also the social network, which can be accessed by portable devices. To use one of Rose’s examples as to how gameplay works across all of that: someone on a social network could own, for instance, a map for a game – and you might have to go through your friends list to find an NPC who can give you the details on how to get hold of it.
“In a ‘normal’ game, that would totally different – you’d be in the game world, there would be a button for ‘Shop’ and then all it relies on whether or not you have the 400 credits to buy the map,” he says. “But in the context of a social network-based game it would be different – the other characters could be players, actors or NPCs, I’d have to find them, talk to them and buy the map off them. I might have to do something in the game world to earn their trust, or simply befriend them and get them on my friends list.”
He adds: “For someone with an established IP that is valuable and rich, this is very unique in how it treats their property.” He says that the concept could be as durable with a character-driven game as it would a sports game or Formula 1 racing game; it would work as well with Worms as it would World of Warcraft.
And there’s a clear opportunity to start creating new IPs with that system explicitly in mind, Rose adds. He also says that the actual gameplay principles themselves are hugely scalable, saying there’s a chance for someone to come up with a game that allows players to pick their level of participation – they might just want to engage in the social network side and never touch the 3D client, perhaps playing a 2D puzzle game embedded in their profile; while some may want to go the whole hog.
To prove the point, Emote already has one project in the works that capitalises on all of that, put together with Swedish developer Avalanche using via a brand new a joint venture business.
But gameplay isn’t Emote’s only target – it has another big aspiration too, planning to significantly redress the balance when it comes to development finance. Informed by O’Rahilly’s time at iFone (which he founded) and Rose’s stint as Eidos’ development director – and a shared history at Sony Computer Entertainment – Emote’s plan is to, says O’Rahilly, to “bring a lot of the functions usually covered by publishers, but which due to changes in the industry aren’t working today, to development via other means.”
Specifically, that means collaborating with developers (and publishers, technology firms or IP-owners, where relevant) to create joint ventures and single-purpose vehicle companies. Such ventures, the two say, result in a more transparent relationship, with less grief than the traditional developer to publisher model. Says O’Rahilly: “It’s a different profile revenue share which is more transparent for all and hopefully leads to earlier break-evens – which is where a lot of the current problems in games development are right now.”
Of course, the SPV element is a common business strategy, often used in UK film production – but it’s still an approach alien to games studios, the Emote execs say.
Explains Rose: “We’ve had a great reaction so far from developers. But there’s still a lot of education to do, because studios have worked under an advance royalty model, and financed by a publisher balance sheet for so long. But give it three years and I think this will be the norm.” And not just via Emote, the two add – although clearly getting their first helps them.
O’Rahilly adds that the shipping and construction industries do similar things; they borrow the money to build something and then make a return on it and, “unlike in games, at no point have they risked their company, or any company they are contracted with.”
Emote consulted with Ernst & Young and UBS to help devise the asset model template that supports their joint ventures, and the company claims its approach means investment is repaid quickly and starts earning interest, so all investors make money sooner. Developers, publishers and other investors get their cheques at the same time – 30 to 40 per cent sooner, or 200,000 to 350,000 units earlier than a normal boxed game, claims O’Rahilly, “which is the size of the overlay games never tend to earn out from”.
“The traditional earn out model doesn’t work,” he adds. “The developer gets $20m dollars to create a game with a 20 per cent royalty – but it needs to generate $100m before any money gets made. And it won’t make $100m. It’s completely inequitable. That doesn’t help the publisher either, because to get that $20m they have to be so rigid and fixed in their contracting that they can’t exploit incremental value, they’re tied to retail and can’t react to the market. It’s over-reliant on a huge marketing spend to shove the game down consumers’ throats. And then there’s a problem with the acquisition men or your COO who wants to sign a game because they like it, or like the developer – they don’t try to maintain hero brands or balance their portfolio. In other industries which have regular yearly investments you actually see that work much better – it isn’t done very well in games.”
The difference between the above – which could well be the backstory to any triple-A game and will be familiar to many readers – and Emote’s pushing for joint ventures is stark, he says. “We seek out a solution that means every one going in understands transparently what is going in and what everyone gets out of it. In an SPV, everyone is asking ‘how do we maximise the return on this’ rather than thinking for just themselves; it becomes very intuitive and isn’t about some marketing man dictating direction. Everyone has a share in a common entity. It also means deals are more honest and tailored. Plus it’s more beneficial to digital and social gaming because that requires more disciplines and you don’t tend to find all of them in one company.”
“‘Participative’ is the greatest explanation of what we’re trying to do in terms of the games and the business models,” adds Rose.
Given the new approach to business as well as gameplay, participative is certainly the word. As is ambitious. So we have to ask – isn’t trying to change so many parameters so quickly a risk?
O’Rahilly doesn’t think so, saying the industry just has to get prepared to start investing smaller, smarter and speedier than it has previously – acting more like the companies driving growth in the online space than traditional games publishers. And it all leads back to his earlier point about how broken and rigid current publishing deals are.
“Because people are taking balance sheet money you have to turn that around and answer to shareholders in a big way – you’re saying you will get results much quicker. That’s what kills it. It’s not the fact you can’t build things slowly and then quickly update the way web does – it’s that your shareholders won’t let you,” says O’Rahilly.
“So it’s not that publishers can’t do it, but they have to educate their shareholders and get out of this rigid model where they are spending so much cash on a single finite thing that means they have no choice what happens next – they’re spending $20m on the primary SKU, $10m on the others and $5m for the handheld. That’s almost $40m. It’s an enormous amount of money. And then they’ve just three months to sell it at retail. It’s pump and dump in the classic sense – that method of thinking locks you into a certain way of thinking, but it creates a cycle which means evolution for the industry very difficult.”
This, however, helps paint a backdrop against which Emote says it can thrive, both in a commercial and creative sense.
“Until recently the industry has lived in a retail-driven market – if we didn’t, Emote and other developers wouldn’t have the opportunity to try things this way,” says Rose when talking about the investment side of the Emote philosophy, then adding when it comes to the gameplay side’s embracing and extending the social networks zeitgeist: “What Facebook and MySpace have actually done for us is that they have done what game design requires – they’ve taught lots of people the familiarity of interfaces. They’ve taught people to work with multiple boxes of information on a single profile. In some respects Facebook already is a game, but people just don’t realise that.”
O’Rahilly adds: “Cross platform is hugely topical now. We’ve had mobile, Xbox Live, PlayStation Network and the likes of Steam – that all shows the industry is digital going digital. For too long we were digital going analogue. And now we have an ability to cross connect.”
So everything about what Emote is doing is different. It demands a different attitude to a production pipeline, a production business, and a production philosophy. Whether or not O’Rahilly and Rose succeed at their plan or regardless of the industry’s readiness for what is a fairly radical way to make a game, whatever happens the result promises to ensure emotions will run high.