Smart casual

Smart casual

By Rob Crossley

September 9th 2010 at 10:30AM

PopCap boss Jason Kapalka shares secrets of the social groupâ??s success

It’s Monday morning and PopCap’s Jason Kapalka is tired. Over the weekend Facebook updated its website.

“I think they changed something in the log-in system,” he says. “I think it was an anti-click-jacking measure, or something. The result of it, though, was that it screwed up our PC version of Bejeweled Blitz.

“Y’know, Microsoft may take forever to update stuff but at least it’s all well documented, whereas Facebook does whatever it feels like whenever it feels like. It took us a while to sort it out.

“It’s not that Facebook [the company] is malicious or anything. I think they come from a web development standpoint rather than an OS one. So there’s this feeling that it’s on the web so it can always be fixed. If you break something you can fix it later once you find out what’s going on.”

Kapalka’s response to our English pleasantry sets the pace for what is a refreshingly candid and open discussion with one of the most universally admired independent studios in the world.

PopCap is an intensely profitable studio with a history of record-breaking titles – perhaps the reason why Kapalka expresses little interest in stoutly advertising his own firm throughout our interview. Like PopCap itself, he’s modest, perceptive and – as you’ll discover below – often surprising.

When I  heard that EA had acquired a social game developer, I was surprised to see it was PlayFish and not PopCap. Surely the firm had made approaches to you?
Well I can’t talk details but obviously we’ve talked to a lot of people, as you would imagine, about potential acquisitions.

I don’t think a month goes by where we don’t get enquiries of investment offers in some form or another. So far nothing has worked out.

Do you want to stay independent, is that what this is, or is it just down to acquisition price?
It’s probably both really. We had a couple of funny instances in the early years of PopCap where we were talking to Microsoft about a possible acquisition – I think it was in 2002 – and they sat us down and gave us this long speech about why our company was worth 5 million dollars, at a time when we had four million in the bank.

We didn’t know much about stock prices and business valuations at the time, but it really didn’t sound like a very good deal even then.

I think for us there’s no pressure to be bought out. We’re not a VC-funded company – we don’t have to give back money to our investors. We’re always looking at what would happen after acquisition – in truth I wouldn’t want to sign a deal where I make a lot of money but I’d end up working with people I wouldn’t be happy with for the next four years.

And of course you might end up having to make a Bejeweled game based on – I dunno – an NFL team, or a property company, or anything that pleases business partners but not the developer.
Yeah that’s always what you give up once you get bought by somebody, and yeah suddenly you’re making a SpongeBob game or whatever.

That’s definitely something we talk about when in discussions with the people who want to buy us – how much of our independence can we retain. “Are we still allowed to make project choices?”

I can’t say a buyout would never happen – we might find the right partner one day. We once floated the idea of going public, but again we thought against it. We’re profitable and we don’t have an urgent need to change that if we don’t want to.



Could you put a price on PopCap?

Gosh, well, I suppose some people do! It’s challenging to answer that question because if I value PopCap at whatever price, then that’s going to be the maximum offer we’ll get from now on.

I imagine if someone took a look at our games and track record, and looked at external factors such as the rising value of social game studios, then we probably could get a number pinned on us.

My perspective is that I wouldn’t just value PopCap on our prior franchises, but on our future possibilities. We’re definitely trying new things all the time. We’re like Pixar in that regard, even though Pixar has an incredible past, it’s not going to be relying on Toy Story for the next decade.

My valuation of PopCap is based also on my belief that in the next couple of years we’ll have new hits as big as Plants Vs Zombies or Bejeweled Blitz or Peggle.

What sort of acquisition prices have you turned down in the past?
There’s probably a lot about this that I can’t say. We’ve been around for a decade, and I guess the only trend from the offers we’ve got is that they’re always going up.

Microsoft’s $5 million buyout offer was the first one, but that’s been rising to pretty crazy numbers. I remember having a discussion with some people back in 2004, and we were talking about a buyout worth $100 million. The biggest offer we had received before that point was only half of that. I think I blurted out a “what!?” when I was told the number [laughs].

That didn’t work out for other reasons, really. I can’t speculate any further on how much PopCap is worth, though, and anyway, the numbers keep going up.

Playdom was recently bought by Disney for $763 million.
That does make us worry a little bit. Certainly the social gaming sector is very hot right now, but certainly we’re worried that at some stage a lot of these things get to become a bubble, where companies start chasing things without necessarily thinking it through too closely – it seems to happen every few years, whether it’s mobile or iPhone or MMOs.

So many publishers are ploughing money into the social gaming space, do you think the bubble will in the end burst?
I think it’s a concern that the whole social game space is getting a little over-heated and potentially becoming a bubble.

There’s a lot of the same signs here that you saw with the dot-com bust back in 1999, with a lot of investments that seem a bit out of scale.

Don’t get me wrong, the social game space is very interesting and I don’t think it’s going to go away, but I think things might begin to level out in the future. There’s a limited amount of growth the space can actually achieve.

Perhaps there’s too many big players to fit in the market.
I think there’s a sense of panic, actually. Companies like EA and Playdom are concerned that they aren’t in this market the way that they’d like to be. They feel like they should be there and they feel like they’ve missed the boat a bit, so they’re trying to buy their way in.

A lot of these [social studio acquisition] deals have conflicting issues. You buy a social company and you want to have an earn-out on it to prevent people from just taking your money and slacking off. But at the same time to have a big earn-out, you have to give that company projects that will return the investment, yet you can’t force them to do too many things either.

For us, our company is still built around the idea that as long as a game is really fun, you can make money out of it afterwards.

PopCap has always been hitting that sweet spot between creative freedom and commercial triumphs. What advice would you give anyone trying to emulate your success?
Oh, well I think a some of our success was down to good fortune rather than careful planning. I would have to say that in our case, whenever we’ve made games that we enjoy playing ourselves, those games have always done well for us in the end.

If you stray too far away from that – worrying about demographics or a certain audience you trying to pander to – that’s usually when things fall down.

If there’s a problem in the office, where people are playing too much of the new game they’re making, that’s usually a good sign.