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Serious Business

Mon 11 Apr 2011 7:40am GMT / 3:40am EDT / 12:40am PDT
Development

Red Redemption MD Klaude Thomas on making serious games, R&D relief and choosing the right investment

Oxfordshire developer Red Redemption's primary aim is to fuse serious and commercial games, initially making a name for itself with 2007's BBC Climate Challenge. Earlier this year, it released Fate of the World on PC - a larger title again focused on climate change issues, made with the help of a large advisory board of academics, environmentalists and political advisors.

Here, GamesIndustry.biz talks to the studio's CEO and MD Klaude Thomas, who formerly headed up Eidos Hungary (for Battlestations:Midway), following stints at SCi, Creative Assembly and EA. The New Zealand-born exec discusses the issues inherent in taking serious games to a mainstream audience, best practices for attracting investment in UK game businesses, the appeal of innovation and the current lie of the land for government assistance.

Q: How hard or easy has it been taking a serious game to a traditional gaming audience?

Klaude Thomas: It's been really hard! On all levels... from the outset, really. You can image the trouble trying to get publisher funding for something for which there's no real model and which is quite different from anything that they're usually doing, so we had to raise our own funding. So all the way through doing that, and then knowing how to design the game, and then bringing it to the audience. Who are the people who are most going to want to play this game, and how do we actually convey to them what the game is about and what it is? As a product proposition, it's a little unusual. So trying to position it correctly to your audience is quite tough.

Just to give you a quick illustration, we had thought that there might be a sort of green and environmentalist audience who are not currently gaming perhaps, not interested or just playing casual games or would be existing gamers. But what we've found is that most of our uptake is from existing strategy or whatever gamers who have got some interest in the subject, and very little uptake actually from the environmentalist audience. That was quite unexpected - not totally, but I was surprised that we didn't make more progress there yet.

We had one person saying that we should either be locked up or executed. And we've had some people quite against the whole idea, but that's really the minority.

Q: What response have you seen from parties outside gaming - academics, politicians, climate change experts and the like? How much do they accept gaming as a suitable platform for discussing these issues?

Klaude Thomas: There's a lot of interest and some really good feedback from them, but I feel like they're still learning themselves how to use games and the context that interests them. That means there's a lot of "this is really fantastic, but I'm not quite sure what to do with it." [Laughs] So a good example is NOAA, the National Oceanic and Atmospheric Administration which is NASA's sister organisation in the States. A couple of their climate scientists played the game and they loved it. They gave us some feedback and they sort of disseminated it around their group, so that's really strong, positive feedback - but as yet I can't quite see how that translates into the bottom line for us, I guess. We've still so much to learn in that area and discover. There's enthusiasm, but a lot of fumbling around in the dark and trying to figure out what to do with these things.

Q: But you didn't encounter anyone complaining "no, games are completely inappropriate for these issues?"

Klaude Thomas: Oh yeah, absolutely. We had one person saying that we should either be locked up or executed. And we've had some people quite against the whole idea, but that's really the minority. I would say less than 5 per cent of respondents. Most people have been really positive about it.

Q: So what was the funding model in the end? VCs?

Klaude Thomas: We went to essentially business angels and experienced investors. So our investors are largely individual people, private investors, most of whom will have a portfolio of investments and for which this will probably fall into the 'risky' category. We have about 30 individual investors, and they all came in at different times and took equity in the company. That's been really hard work to put that together, yet it's been really heartening that individuals have liked the idea and been interested in that convergence of gaming and climate change.

The thing about equity investment for the UK industry is probably the EIS (enterprise investment scheme), the support and relief which the government gives on taxation. So if you invest in a company and you hold onto the shares for a couple of years you get tremendous relief on your tax against the investment itself and any losses or gains made on the investment. That has meant that in investing in a risky thing like we're doing has been more appealing for UK investors than it probably would be otherwise.

For these private investors, the triggers for them are does it look interesting, does it look like it could provide a really interesting return and also does it have something about it that just appeals to them on a personal level? I think a lot of what we were doing, that combination of a decent business level and doing something that interested on them was why we got the investment. One without the other probably would not work. No-one ever came by and put money in without looking at the business plan and what they might receive and return, but equally I don't think anyone came to us looking solely at making a straight game investment.

Q: Did you get a sense that these investors were interested in games generally, or was the climate change element stronger for them?

Klaude Thomas: It's definitely because of the hook, because it was of interest to the wider society. It wouldn't even necessarily need to be climate change, but I bet you'd have a really hard time getting funding this way from a fantasy game or sci-fi game. Perhaps for a game about something people known about and are interested in, and that has some resonance for wider society. Maybe it wouldn't need to be serious, but it needs to be something that they can relate to. Climate change is obviously really topical and important, but I bet you could do the same model with other subjects.

Q: They weren't pushing for you to make it a Farmville-type game then? Social games seem to be all the rage for investors at the moment...

Klaude Thomas: No, no. I personally don't favour the Farmville type gameplay, because I regard them as essentially akin to gambling and probably a social evil in my view. So anyone who wanted us to be like Farmville was probably going to be resisted quite strongly. But no, not really - no-one tried to tell us how to make the game. What they looked for was did we have the experience to know what we were doing? We'd made a previous game in this genre, I've personally delivered many games, so they wanted to be able to trust us to do that work. If they felt they had had to say something about that, that would have been a negative for investment because they don't want to have to get involved. That's the expertise that we're supposed to bring, to try and make the game this way or that way. That's been a really good thing about this kind of investment.

the UK is basically a terrible place to do games development work in terms of any advantages from tax

Q: What kind of budget did you have for this project?

Klaude Thomas: Altogether, we raised about 1 million, but we didn't spend all of that on the game. First of all it costs quite a bit to raise money. I would guess that we spent at least 100,000 or 200,000 just on raising the money and administrating that. This is a really important thing if anyone else is thinking of raising money this way. It takes a lot of work and time and money to do the administration. We spent quite a lot of legal and setting up our licenses and distributor. We spent something - not enough, probably! - on promotion. All told, we probably spent 500,000 or 600,000 on developing the game itself, probably about 400,000 on other things.

Q: Are you going to make a profit and be able to pay off all the investment?

Klaude Thomas: The thing about equity investment which is really good for game development models is that you don't have to pay it back directly. If someone has shares in the company, you don't have any debt, essentially. You don't have to pay shareholders anything - it's not like a loan. In fact we do have one loan from a Regional Development Agency, Finance South East, and actually for doing risky development like game production it's much better to sell equity than taking loans. Loans are cheaper - the money is cheaper in terms of what it actually costs the company - but the thing with the loan is you have a payment schedule and you have to make that, otherwise you can go bankrupt. Whereas with equity, you don't have to pay that money back. If anyone's thinking of trying to raise money for games, equity is a really good way of doing that if you can.

In terms of paying off our investment, the return that is contemplated is in a three-to-five year timeframe, essentially aiming to build value in the company and then sell the company. That would be when shares ultimately become worth something. The immediate revenue that we make from the game most significantly goes into whether we can continue our business plan and expand the studio, put other projects underway and build on what we've done.

We're not there yet, but that's what we're working on at the moment, and for the next six months. Trying to promote the game as much as we can, get it onto other platforms, get additional download content for it and see if we can generate enough money to go forward with another project and produce a follow-up. We're not there yet, that's the work that lies ahead of us over the summer.

Q: You mentioned you'd have investment from a regional development agency. Were you affected by the government's decision to basically kill those off?

Klaude Thomas: We were affected. We actually had an application initially to have an RDA take some equity in Red Redemption, and that suffered in all the reshuffling and so on. Then more recently received an actual loan and that process was okay, so for that we weren't affected by what the government's doing. I think if anyone's thinking about getting money from RDAs, you really can't rely on getting anything at all. If you do, it's probably going to take quite a lot of work and in time - in our case maybe over a year and a half, ultimately.

The other thing that we get money from is the R&D relief on tax, which is being improved at the moment, to 200 per cent. That's quite an important component - that's usually enough money to run the studio for a few months. It's very important to do, and to be very assiduous about, and that will be more so in future.

Q: It seems well-suited enough to games for you, despite being a broader break?

Klaude Thomas: Well, you know, the UK is basically a terrible place to do games development work in terms of any advantages from tax and so on, but our experience has been that HMRC has been basically very cool to deal with on the R&D at least.

Q: You also mentioned other platforms earlier - how confident are you that you can take Fate of the World to platforms other than PC, then?

Klaude Thomas: We're speaking with another company about bringing it onto iPad and Android, which I think would really suit this type of game because of the card-based interaction. You can imagine easily, just been able to flip the cards and go to other hands, and rotate the globe to places you want to go to... I think it could be a really pleasant thing on that platform. We're porting it to Mac at the moment ourselves, and we hope we to see it go to a couple of other languages as well. We need to get to other platforms, we don't want to restrict it to PC. Just PC only is probably quite difficult to do enough units from. We also maybe need to get to other markets, like the Asian market.

Q: Is wanting to get beyond PC to do with the size of the gaming install base there, or more to do with the nature of this particular project?

Klaude Thomas: Yeah, at least some PC games can succeed very well. In retail at the moment, it's quite hard to sell PC projects because PC has moved so much onto digital. Digital is perhaps not too difficult to do modest numbers but quite tough to do the same as you would do on consoles. The thing with the PC market is it's so divided, so split up, in so many different fragments. The good thing about it for a developer like us is we get 70 per cent of the price through digital downloads, as compared to perhaps 20 or 30 per cent of the retail if you're going through boxed copies.

Q: You're a reasonably big team, aren't you? That must make it much harder to experience the runaway financial success that one or two man projects like Minecraft see?

Klaude Thomas: Yes, I guess for Minecraft where it's just one or two guys doing it, it works fantastically. Probably for the next decade we're going to see stuff like Minecraft because we're always discovering new kinds of gaming. It's not like the movie industry where all the genres that are going to exist have already been invented. So there'll always be breakout games like Minecraft. For us, we're in a different sort of niche from that. What we're discovering is that we're finding people who really love our games and just we need to get enough visibility to reach all those people.

A lot of the serious games community are not people who are out the outset game-makers, but they might have been teachers, or someone with a particular interest in a subject

Q: You used to head up Eidos Hungary yourself - what led you out of mainstream games into something a bit more low-key and esoteric?

Klaude Thomas: I've always felt that we're just at the beginning of understanding what we can do with games, and gaming should be doing more. It's like wanting to use your powers for good, as it were. I wanted to find ways to work on projects that were appealing to me as well as to the market. It's extremely important that you believe that the product's going to appeal to an audience. And I really like doing innovation - that really interests me in games development. So for me, the Red Redemption project appealed to me because it was innovative, I could see that it was uniquely marketable - if you wanted to play this kind of game, there was basically this game and not really anything else.

I really liked the idea of trying to show that serious games could be done on a commercial scale, because I felt that if we could do that we might show publishers that they could maybe start to take risks with all the other great serious game-makers who are out there. There's a ton of people making quite small-scale serious games on all kinds of subjects. The guys who did Peacemaker, they did really well with it. I just felt that there was there was a market here, and it was actually feasible to develop serious games commercially. We're still a way from quite proving that, but I think it's a high concept that I'd like to prove. We'd also like to get into a position where we can ourselves sponsor other projects in this area - that would be incredible.

I had other choices at the time, I could have gone back into large publisher production, and that's good as well. But I think I'm most drawn by the projects themselves. When I worked on Midway, that was one of the first projects where I really had a choice over what I got to work on. That's really important, because at least if it doesn't work out then you know that it's your own damn fault! It's really soul-destroying to work for a couple of years on a product that at no point did you have a choice as to what it was going to be. It's just as hard as to make a bad game as a good one, in many respects.

Also I really wanted to do a serious game. I looked at a lot of serious games at the time, and essentially most of them were taking a subject and pushing it onto a game. That's not really the right way to do it. The gameplay has to emerge out of the subject, ideally, or map very tightly to it. I think that's because a lot of the serious games community are not people who are out the outset game-makers, but they might have been teachers, or someone with a particular interest in a subject. So what they're doing is often not really doing the job of fabricating a game, but taking a dressing of a topic or political point and then lying that onto an existing game - that might not produce a very good mapping. So I was drawn to this for a lot of reasons. I guess the first big question I asked myself, though, was did this look like a marketable proposition, and offer something that you couldn't get elsewhere.

I'm very project-driven, but other people might not be so concerned about the project, but just the process, and getting that to work well - or they might just be interested on an economic basis. I love innovation, even though it's often diabolically horrible to do. Doing innovative work is really, really difficult in game-making. You look at something like Minecraft and think "wow, that's cool", but what you don't see is all the many, many other game ideas that don't actually develop into anything at all. That's the thing about innovation - you're trying to find the thing that will actually work.

One of the things that we did with regard to that was to map the plan out over multiple products - it's not a one-product deal. I think that, again, you'll struggle to show a really interesting, investable opportunity to private investment if you try to make it off just a single game. I think you would only be able to do that if you were already known, had had some fantastic hit, and people were willing to take a risk that you can repeat that hit. But basically you need to look at the risk profile and how that maps out over multiple projects, rather than assume that you're going to have a smash hit with any one game. Try and make more modest assumptions.

Klaude Thomas is MD and CEO of Red Redemption Ltd. Interview by Alec Meer.

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