Social network games are becoming increasingly attractive even to non-gaming businesses - Rupert Murdoch's News Corp is the latest in on the act, having very quietly picked start-up firm Making Fun late last year. The acquisition came to light in February, along with the news that Making Fun would be a publisher rather than developer - seeking and funding independent projects of note.
With the nascent publisher having now made its first dev deals, GamesIndustry.biz spoke to the outfit's VP and GM John Welch (previously co-founder and CEO at PlayFirst) on just how these indie partnerships would work, what level of involvement the parent firm is taking, how Making Fun could partner with other News Corp divisions and whether or not this new endeavour could ultimately outdo Zynga.
Q:You kept the acquisition news pretty quiet, so can you tell us more about what's planned as a result of it?
John Welch:The short term plan is that Making Fun has announced itself as the first full-service publisher to be addressing the social games space. By full service we mean not only providing distribution for a game which someone else may have financed and created, which a few companies are doing, but rather funding games from the concept stage. Literally I had conversations in the hallway at GDC - "hey John, I saw you talking about this or that thing, I've got this idea for a game..." and we're about to sign the contracts. So we will provide the full budget for developing a game, we will partner on the technology side. We've got an extensive platform technology on the back-end side, and you can imagine running games as a service as opposed to package games is a bit of a different proposition in terms of being a publisher. So we have to have some conformity in the back end in order to be able to run what's going to be three or four games in the very short term, and could be 10 or 15 games pretty quickly in a year or so.
Then we'll partnering with the developer along the full spectrum of game development disciplines, so I have what would be one of the best game development teams in the world internal to my studio, except we don't actually make games ourselves - we make games with partners. Some developers might need help on the technology side, others on the design side, others on the art side. It really depends - we partner in whatever ways is necessary to have a successful project.
There's marketing, of course, as well - both cash marketing and a variety of different things we can bring to bear because we'll have the economy of scale, being a publisher.
If a developer ships a game and it makes a dollar, they will be making a royalty from day one.
Q:Is it broadly analogous to how traditional game publishing has worked, or will the licensing and royalties be a different model?
John Welch:I think at a high level it's very similar - the concept being the publisher takes the financial risk and provides expertise technology and distribution. What's different is I've built my career in online gaming over the last ten years or so being really pretty friendly to our developers. Without going into the details, what we've done in our first three contracts that we've signed I think is a pretty innovative deal structure, where we're really underwriting the exact cost of the game, so we really don't want our developers making a profit on the development side. The day the game launches, we share a very small bit of gross revenue royalty, which means the developer, if they just ship a game and it makes a dollar, they will be making a royalty from day one while we're still trying to dig ourselves out of our investment. Then once we make enough money to repay the investment - and it's definitely a repay the investment, not a loan to developers in the traditional publisher recoup model where the developer never sees any royalties - then we increase the royalty to the developer.
We look at it as a partnership, we really try and structure a deal where we're all on the same side of the table. We want to spend as little as possible on the game, as does the developer, because as soon as we get our money back they get a higher share, but at the same time once the game makes any kind of a profit the developer's getting a little bit to keep their motivation being a profit motivation and not a development fees motivation.
Q:Are you determined to keep it strictly as a partnership relationship? Could any devs end up being brought in house or acquired if their games prove successful?
John Welch:That speaks to more of the long-term plan, and I guess I just say I don't know at this stage. My last company, PlayFirst, we were the first company publishing in the casual download space and we built an internal studio pretty quickly there. I can say that there are advantages to the outside model - you tap into the creativity of a global community, which really is global - whereas ten years ago there were countries where game development wasn't the focus. Today, the focus is much, much broader there; there are talented teams in places that just didn't exist ten years ago.
Q:Will you be focusing on emerging territories rather than North America and Europe?
John Welch:No, really when I say 'global' I mean 'US and global.' Of our first three deals, one of them is a Seattle-based company, one is Bay-area based with a team in Eastern Europe and one of them is in Canada. So it's really spread. And then the teams we're talking to are... a couple are in Southern California, but as well South America. So really global. What I've found in my experience having done publishing in online games for the last ten years is you get that creativity from outside teams, the kind of scrappiness. They can developer games more cost-effectively than you can when you're a bigger company. They're a small team, they're wholly focused, they're passionate about they do, they don't worry about some of the things that other companies have to worry about and be more formal about. So it really could be a win-win.
I will tell you though - it's harder. It's actually a lot easier to develop a game in-house, because I could walk up and see what the programmer's doing and talk to them, I can see it on a daily basis. In the external model you've got to have a great producer on your side who has a really good producer on the other side. Our methodology is we try and develop close relationships between the tech leads on both sides, because of the service platform technology approach we take. We assign a senior engineer to every project, a direct relationship with the tech lead on the other side. They have Skype windows open constantly, collaborating really closely.
You pray to the gods of Sony, Nintendo and Microsoft, otherwise you're out of luck.
Q:Have you been staffing up, then? You were a team of three when you were acquired...
John Welch:Yeah, we're about 14 or so now, looking to get up to 20 pretty quickly, but again the great advantage of the external model is we don't need to get that big, because we're employing more people on the outside right now by at least a factor of two.
Q:How heavily are News Corp involved with what Making Fun is doing? Are there many mandates from on high?
John Welch:It's really great, actually. I didn't know much about News Corp before we were acquired, but what I've learned is you discuss your expectations on a sort of annual basis, and then you go and execute. We check in from time-to-time, but it's much less even than what a board of directors type situation would be, or a venture-backed company. We're kind of tucked up into working with IGN more on a facilities and IP and legal kind of basis, getting those kinds of services, and office space. But really Making Fun is an independent company that has its mission and is off executing it. If we do well, we'll hopefully continue to grow.
Q:Do they seem clear about what they want from social games, or still fairly exploratory?
John Welch:I think that News Corp wants to succeed in online gaming, and believe that online gaming has some potential. Obviously you don't have to have much inside information to know that there are companies making some good money in the social games space, and to understand that the traditional games industry is having some problems. Personally, I've been ranting about the death of the console for the last five years. I think it's kind of ludicrous that we have three gods you can pray to get your interactive content on the living room screen. You pray to the gods of Sony, Nintendo and Microsoft, otherwise you're out of luck. We've seen what happens when companies democratise a gaming platform like the iPhone and now Android mobile devices and tablets. Again, you have this notion of a global development community able to creative without asking permission.
I'm not speaking for News Corp, I'm speaking for John Welch here, but my passion for being part of a company like News Corp where I have resources is to be able to leverage the more democratised platforms to get content on a mobile handset, on game-capable platforms.
The mobile handsets now, it's almost misleading to call them mobile handsets. They're personal computers you put in your pocket, they're increasingly gaming platforms. And the living room screen is, I would imagine, going to be opened up shortly, whether it's Google or Apple, again in a more democratised fashion where you don't have to pray to the gods of the game platform companies to get your content on screen. I think when we do that, that internet notion of creativity without permission, that's what gave us Google, what gave us Facebook and Zynga. You can go on back to Netscape and Yahoo. These are companies started by very small teams who just did something kinda elegant and cool because they could, and it took off.
Q:With that in mind, how open-minded are you being about the games you'll publish? Are you likely to focus on Zynga-type games, or take risks?
John Welch:I think we are going to do some different things. First and foremost, we're not even playing the game in the first innings of the social games. Zynga won that one. They came in and established ways of doing things and kinds of games, and they built a hell of a great business. If we're going to come in and do what they did, I think that would be a losing proposition. We're not here to copy anybody's tech or anybody's game designs or anything like that. What we're doing first and foremost is making better games. I think the second innings of social games is going to be defined by people making real games, or at least starting to make real games. And you have real developers doing it now too - folks like John Romero's team coming in and making Ravenwood Fair. That was his first attempt - that was a couple of weeks project for him. And I'm hoping you'll see more creative stuff, that's more real gaming from teams like that. I know my team is here to make real games.
Our first game out, which I can't say too much about, it's going to do something pretty revolutionary in the social games space: it has an ending. Name another social game that ends. You know you play a console game and it ends - you get the satisfaction of going "I finished it!", staying up until 3 AM with it so you can brag to your friends about it. And that bragging to your friends is marketing the game for us, right? With social games, everybody who stops playing kind of does it because they get sick of it - that's not the way that I want to leave my customers when they finished an experience that they may have paid me money for, or at least a lot of their time. I want them to have a sense of accomplishment.
Real games have tension between the easy thing that's safe and the risky thing that has a better pay-off. There's no tension in social games. I'm not saying we're going to do a Call of Duty on Facebook, what I'm saying is we're going to use the techniques from the traditional game world in the right ways for social. Innovative ways. And we're going to do something that is wild and crazy and you'll be like "are you kidding me, what is that?", and we'll do some things that are maybe less innovative but maybe get a new market. One common theme for us on top of making better games is every game has a very strong market thesis. We're not here to make Fox IP - although I'd be open to doing some things there - we're here to make great games where every single game we greenlight has a very specific target demographic and market thesis - generally speaking, some advantage in marketing. Do I want to come into this market with zero users in my network, and compete with Zynga by buying Facebook ads? No.
Q:Are you expected to use Myspace [owned by News Corp] heavily?
John Welch:No, there's no mandate at News Corp. Again, my personal experience at News Corp is I have not been told I need to do anything with anybody. I'm very courteous when someone from another part of News Corp calls, and when I call somebody else at News Corp they're very courteous to me. We have great discussions, we talk about possibilities, but there's nobody from the home office saying you must do such and such. That's a benefit and a drawback, you know. The benefit is I get to run the business; the drawback is Fox has some great IP, News Corp has some great IP outside of Fox. There are some things where it's just like anybody else - if I want to work with them, I've got to form a partnership.
Zynga isn't part of a major media company; they're leader coming out of the first inning of the ball game, but I don't think anybody in their right mind thinks this game is anywhere near over.
Q:You mentioned you were sharing tech with IGN - what's the ultimate plan there?
John Welch:We're sharing space with the IGN folks, but their market is very much a hardcore gaming, more male-leaning market. The first couple of games I have coming out are really not that market at all, but the third one is something that might be interesting to them and so I've kind of started some conversation. But really it's they run their business, just like I run mine.
What I haven't seen at News Corp, which I've heard horror stories about at other companies, is "oh, it's easier to work with outside companies than to work within the company." That's not at all true here, from what I've seen. Everyone's extremely courteous and interested in at least exploring things. Maybe it's because there are none of these mandates - because your parents aren't telling what to do, you get on better.
Q:How much do you sense you're in a race with other companies to grab land in social gaming as it grows up?
John Welch:I look at the social gaming space in very much the same way as I'd look at the competition in the casual online gaming space. In a sense, bring it on. We have our differentiated way we're coming at the market, partnering with outside developers, so there's kind of three categories of companies right now, all going at the same market. You've got your big super-developers like Zynga, and some of the ones that have been acquired by other big companies. They are developing their own projects with their own internal teams, they're very well-funded, they have a lot of success under their belt, they have teams to do analytics and that sort of thing.
Then you have small developers: they don't have any of that. They've got passion, they've got a lower cost base, they're creative. A lot of them will fail, but a couple will succeed with really novel, innovative ideas that become big, and hopefully they can execute on them before other people can copy them too much. And then you've got the third category, which is right now Making Fun, all by ourselves. We are here partnering, picking the very best of those concepts out of the independent space and saying "together, let's form something that looks like the best of both worlds."
Also from a marketing perspective, looking at ways we can partner within News Corp. News Corp has a whole lot of eyeballs it reaches across its various media strategies, and to the extent that we can make partnerships that are win-win between News Corp brands and what we're doing within game - that's the way that we can have an advantage that Zynga doesn't have. Zynga isn't part of a major media company; they're again leader coming out of the first inning of the ball game, but I don't think anybody in their right mind thinks this game is anywhere near over. The world is not becoming less social - you're not going to see people carrying less and weaker devices, playing fewer games five years from now.
John Welch is vice president and general manager of Making Fun. Interview by Alec Meer.