Thursday, 12th July 2007 at 1:02 pm
We interview Karl Jeffery to find out exactly why Climax sold off its Racing team, what that means for the rest of the company, and why the world is refocusing on the UK development scene...
As its roots in games development stretch back to 1988, Climax is one of those studios closely associated with the British games industry.
So it’s apt to view the studio as an empire builder – flying the flag for the expansion and globalisation of UK development having been forever-independent developer since starting out as a bedroom coding-style team run from CEO Karl Jeffery’s flat, but also having diversified into a multi-site studio working with some notable publishers in the newest fields and upcoming territories.
Climax had barged into Los Angeles, full of bluster about ‘the Hollywood connection’ between film and games production, and its home-grown teams steadily rode through the UK studio rough patch of the early 2000s, and their own crest of a wave, carefully selecting work for hire contracts and investing money in next-gen. It was (and still is) unique, but typical – independent, but smartly plotting its course in line with the games industry itself.
That might make the past month’s activity – the sale of its notable Racing Studio and the restructuring of the rest of the operation – cause for alarm. If Karl Jeffery wasn’t in such an amazingly good mood about it all when Develop paid him a visit at the company’s Portsmouth HQ, that is.
DEALING WITH DISNEY
Which isn’t to say that the Disney-owned Buena Vista Games’ acquisition of the Brighton-based racing team isn’t one of the odder stories to have emerged from the increasing consolidation in the games market.
Jeffery agrees: “Yes, I can see why some might see it as a bit strange. I’ve never heard of someone selling a part of their studio but remain independent. Peter Molyneux kind of did it with Bullfrog given that he left eventually, but he’s with Microsoft now. Usually with these studio sales people have one studio, they sell it, and go with it to gain financial freedom but lose operational freedom – so I’m actually sitting here really excited. In one fell swoop we’ve gained the money to remain a big player. And in fact we’re less encumbered now, as going from four to three studios means we can be more focused.”
The abridged version of the Racing sale runs thusly: Disney approached Climax as it was finishing work on MotoGP4, asking Jeffery if the racing studio was up for grabs. The publisher’s ambitious plan to start developing its own property meant it needed an in-house resource that knew racing, gaming’s core genre and fiercest to succeed in as a developer, and had good tech. Jeffery told them to clear off.
“Our first reaction was no. We didn’t need to sell them. Racing was a good, profitable business – the whole business is – and we were enjoying it. We thought: why on earth would we give that away?”
Disney wouldn’t give up, but neither would Jeffery: “they kept coming back and asking questions, and then made a formal offer which was pretty attractive, but we still just said no to them. They came back three or four times.”
But: “Paradoxically when you don’t need to sell something you don’t want to get rid of it, but that means you end up getting the best deal. Eventually they made an offer we couldn’t refuse.”
Saying yes wasn’t a snap decision to fob BVG off, either – and nor can you write off the transaction as the typical money-driven win-win we’ve come to expect in a year that has seen Juice Games, Sports Interactive, Lionhead, and plenty of others (see page 5) all taken in-house via publisher acquisition. Jeffery was convinced that the sale made sense for everyone on each side of the deal from a creative as well as commercial standpoint.
“I think it’s good for Climax and I think it’s good for the Racing Studio – if Disney lives up to their promise,” says Jeffery, hinting that he made Disney enter a gentleman’s agreement that said they wouldn’t squander the team.
“After all, Disney does a certain type of game and our initial reaction was ‘What does Disney want with a racing studio? Are they going to just do Mickey Mouse Racing?’ We wouldn’t have sold them the studio if that’s what they wanted to do with it and after seven years working with them and their working in the trenches battling to hit milestones, for any amount of money I wouldn’t have sold them down the river. So we consulted with them every step of the way and it wasn’t until Disney established their credentials and explained what they wanted to do with racing – and I do know a little more than has been announced – that we accepted it. It absolutely won’t be rushing out a game with a movie attached – obviously they’d be mad to not look at what properties they own and see where there is a match, but we got them to make assurances about retaining creative freedom and funding, so to a larger degree the guys are going to have a lot more freedom to make what they want to make.
“So really, even though three of our teams are moving in different directions to the other – we’re all getting freedom and funding. It’s having your cake and eating it.”
Of course, Disney had its own stipulations, and as part of the deal Climax is currently out of the pure racing genre for the next two years at least – however that’s no problem to Jeffery, who admits that there was some consensus amongst the non-Racing management that the genre was failing to excite.
“Don’t get me wrong, I’m incredibly impressed with what Racing did – MotoGP was great and we’d never done an ATV game that has sold less than a million units, and the team always came up with great content for the two franchises,” he quickly adds, before elaborating: “Y’know, we rode that racing wave very well… but as an individual I struggle to see what we can add creatively to that area. All the good licences are now gone. I genuinely don’t know where we could take racing creatively when you’re having to work with MotoGP, which you of course can’t change the rules of, or ATV which is Sony’s thing.”
There’s a little hope for the racing genre, however, says Jeffery – and even though he’s now unconnected with the Brighton team, he still wants to back something they have in the works: “The guys on the ground there have one idea, which hasn’t been announced yet, which could do the business in that genre. Whether Disney backs that remains to be seen, but if they do what they plan to – particularly on PS3 – it will be a brand new experience that will impress.”
It’s not a project that Jeffery will be related to for much longer, of course, and in talking about effectively closing that door, he sums up the whole Disney deal as “opportunistic”.
“For the rest of Climax, selling Racing is an excellent thing. We’ve got capital for the whole business which means we can be more strategic; there’s lots of things I’ve always wanted to do and when you’re a small company you’ve always got to watch your pennies, so now we’ve got room to manoeuvre.”
The sale of the Brighton-based part of the business isn’t the only change to Climax, however. With new money in the bank, Jeffery and the management team have set about restructuring the entire company.
The Kingston, London handheld team, Santa Monica’s Climax LA and the Portsmouth HQ are now under a unified structure that reports to development boss Simon Gardner. The LA team will, in fact, be downsized to just over ten staff, while Climax aims to add another 70 staff to its UK teams (the changes during the racing sale staff wise meant the company went from 358 employees to 253, but has plans to be back up to the near-400 mark within six months – see ‘Rediscovering the UK’).
Take into account these sweeping internal changes and you’d be forgiven for, on first glance, assuming that the Disney deal was either a fire sale or auction of the crown jewels.
Even though MotoGP was ultimately a licensed title managed by THQ, Climax Racing turned it into a trailblazer – it was an Xbox Live launch game and prized by early adopters, it proved there was life in the two-wheeled racing circuit, and made the capable transition to 360, all of which would be reason enough to not sell it. You’d be wrong, though – in fact, they were the reasons it was sold.
Jeffery explains why: “People often point to MotoGP as being what Climax was about, but it never shifted enough units to make us money. Financially, we haven’t sold off the crown jewels – this studio, Solent, is the one that makes the money. The Racing Studio gave us the glamour and the kudos. If you look at it in review scores, awards and kudos, yes we sold ‘the crown jewels’ – if you look at it as a business with growth and potential, then we’ve kept the crown jewels. And I truly believe that, because there’s nothing in the market like the projects we’re working on here coming out the racing studio.
“There’s a huge number of DS games coming out of Kingston that are remarkable. However you dress it up, MotoGP is a sport – don’t get me wrong it’s a great studio and they will do wonderful things with Disney. For me, we’ve retained our future and sold that which represents our past.”
And Jeffery is up front about that past. When talking about the aborted Warhammer Online project that Climax’s old online base in Nottingham attempted, he says “we essentially wasted £12m on that – and we weren’t even talking in the kinds of subscribers World of Warcraft would go on to get. But hey, at least we tried”; old Xbox-exclusive game Sudeki is briefly mentioned with a shrug when talking about the difficulty of new IP; and there are no apologies or regrets over how Climax so doggedly slipped into the work for hire scene and let it dominate its slate, especially during what was a very tough period for UK development overall.
“We thrived in the period when others went out of business. I’m not unhappy with what we did then, because we were all part of that environment at the same time, but I’m happy we survived,” he says. And survival has given the team a raft of experiences that sets Climax up for its future – what Jeffery calls ‘era number four’.
THE FOURTH AGE OF CLIMAX
Beyond the restructure, there are already more than just glimpses of exactly what that future is.
From a day-to-day point of view, there’s the company’s busy slate of software. In London, Climax Handheld has six teams working on various games such as Diner Dash for Eidos, Oblivion PSP for 2K and other unannounced games (some of them for Buena Vista, natch). LA is also working on the PSP version of Silent Hill. Meanwhile, in Portsmouth Who Wants To Be A Millionaire? has just been finished for Eidos (and in time for Christmas – it’s also the first third party game permitted to use the Buzz! buzzers), while production on tie-in Ghost Rider for 2K moves apace. And there are of course a number of other unannounced and/or unsigned projects in the works. The company has also invested significantly in a brand new project management system and other methods to reduce costs and risks (see ‘We can halve the cost of next-gen’).
But to keep what is still a big wheel turning, it’s the strategy for momentum that is interesting.
Explains Jeffery: “The perception of Climax over the next year is going to change from it being one of those companies on the old model of British development – such as Argonaut, Kaboom, and… let’s call it Old Climax – where it was all about multi-site development and who has the most studios, the most teams, the most staff with the most projects.”
He’s adamant that this ‘old way’ of development is fast going out of fashion and feasibility: “We’re entering a new generation of being a new boutique studio – the multi-studio, multi-location industry we’ve lived through? That model is dead.”
There’s “no way” Climax will add a fourth studio to its bow, adds Jeffery, and the most he’s willing to say about expansion outside of recruitment is that the company would be happy to work with those pockets of talents where it finds it: “I wouldn’t want to buy them out but I would start a co-production project, or a long-term commitment to each other, but trust me there will be no Climax Prague.”
In fact, he idealises a world where there is only ‘one Climax’: “If I had a magic wand, I would put all of my people in one centralised studio, for loads of reasons. The first is control – you can upload builds via FTP to head office, but nothing beats being sat with the team playing something and working things out together. The other thing is knowledge sharing – you can have all the internal forums and intranets you want, but none of that beats being sat near someone and talking about it over a desk.”
But at the same time, Jeffery is realistic that there’s no way Climax could restructure futher without something drastic – and anyway, that there’s a clear handheld and console split between its two big teams serves it in good stead.
But the idolised model of a singular entity will dribble down to the ways the restructuring is handled: “Making the move from Old Climax to New Climax is not just a ‘press a button’-style change. It’s harder to change something than it is to do it from scratch – but that model, with the Ninja Theorys of the world and any of the hot boutique studios – that’s the model we are persuing now. With Racing going and capital coming in we’re now much closer to that. There will be some other steps, but one studio, with one title and one relationship with a publisher – that’s the gold standard the industry has to aim for now which is completely at odds with what, say, someone like Warthog was all about.”
What happened to companies like Warthog, and the various other studio developments of the past generation, seems to be in the forefront of Jeffery’s mind – and he’s keen to keep making sure Climax doesn’t make the same mistakes.
He says: “We thrived in the period when others went out of business. We’ve always been tightwads financially and are very cost conscious – perhaps almost too paranoid. A lot of these guys, like Argonaut in particular, thought they had an unlimited amount of money, but obviously didn’t run their companies that well. So really we had to do what we had to do – but now having money in the bank and fewer relationships to manage gives you more energy.”
FINDING THE FIX
And some of the money and energy will be focused on The Fixer, a new game for 360 and PS3 based on a new IP. It’s been in the works for 18 months (and probably has over another year’s work to go), but it’s striking demo and pitch reel is currently being shopped around.
“The Fixer is the thing we wouldn’t sell outright to Disney – even though they wanted it,” explains Jeffery, his comment that the creation has been “a labour of love” at the Portsmouth office explaining why the team is so protective of the property – but that the team has also devised something they’re not afraid to turn down a publishing deal for is a telling sign of intent.
Explains Jeffery: “We’re going to take an approach that’s a bit more Rare-like and say that if it takes more time and more money and more energy to perfect it and give it what it needs, then so be it – because we’ve sat down and said ‘let’s make the game we want to make and be proud of once it’s out there in the market’.”
It’s also a telling sign about the motivation that has driven the Racing sell off and the restructure. Jeffery has clearly kept looking over Climax’s shoulder, saying that he wants out of the arms race that the superstudios were once in: “It’s really tough because there’s a natural tension between what you have to do for business needs and what you want to do as an individual. Until now my career has been focused on building a business, but that means you make compromises – maybe you take on a game you don’t want to do or take shortcuts you wouldn’t want to do. And that’s tough as we’re all in this industry because we want to be making games and love them. So now we’re looking forward and we have funding and time to do what we want.”
And, perhaps, this is the most telling thing – and it plays back into the Disney deal – Climax wants to stand up and be counted beyond its milestone-hitting millstone of a Racing team: “Unfortunately our other studios had to play second fiddle to Racing because it was so well regarded – Brighton and Blimey overshadowed the rest of our guys.” Jeffery knows that, having claimed all this the studio “will have to perform or we’ll look like fools”, but hopes that people “withhold judgement until the next round of games come out and let them speak for themselves”. He also knows that touting a switch to a boutique model might come back to haunt him, but says: “At the end of the day in this business the creativity will win through.”
However, isn’t the ethos of a boutique studio at odds with what Climax is – a multi-site business popular with publishers and with a hugely commercial reputation? Jeffery’s final answer says no. And, arguably, embodies all the optimism an independent should have – but is something you might be surprised to hear from the CEO of a company that has ridden the ups and downs of a world that has, in just a handful of years, become risk-heavy and corporatised.
“We have no investors, no external finance. We don’t answer to any shareholders or bankers. And we’ve got plenty of money and everything to play for. If what you want to do is pander to the venture capitalists of an IPO and getting into that growing trap of ‘Oh, maybe I’ll be a publisher’ and maybe I’ll licence all these properties – I’m not into that, no thanks. I just want to try and make great games.”
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